Key Points:
- Intel CEO Pat Gelsinger will present a plan to reduce costs by selling non-core businesses and adjusting capital spending.
- The semiconductor chip manufacturer may sell its Altera unit, acquired in 2015, as part of broader restructuring efforts.
- Intel plans to reduce capital spending to $21.5 billion by 2025, down 17% from this year.
- The company faces challenges from industry leaders like Nvidia, and its market valuation has significantly declined following poor financial performance.
Intel CEO Pat Gelsinger and senior executives are set to present a strategic plan to the company’s board later this month. The plan aims to trim costs and revamp capital spending as the once-leading chipmaker seeks to regain its footing. According to sources familiar with the matter, the plan will include divesting non-core businesses, such as the programmable chip unit Altera, which Intel acquired in 2015 for $16.7 billion but now finds too costly to sustain.
The proposal, to be discussed at a mid-September board meeting, will focus on streamlining Intel’s operations without plans to sell its contract manufacturing arm, known as the foundry business. While Gelsinger’s plan is still being finalized, it may include a pause or halt in constructing its $32 billion factory in Germany, which has faced delays. Intel has already separated the foundry business from the design business, reporting financial results independently to ensure confidentiality between customers of the respective units.
Amid fierce competition from companies like Nvidia, which leads the AI chip market with a valuation near $3 trillion, Intel has seen its market cap plummet below $100 billion following disappointing second-quarter earnings in August. The company has also paused dividend payments, laid off 15% of its workforce, and aims to cut capital spending to $21.5 billion by 2025, down 17% from current levels.
The reputed semiconductor chip manufacturer has retained Morgan Stanley and Goldman Sachs to advise which businesses to retain or sell, though bids for specific units will likely follow the board’s endorsement of Gelsinger’s plan. The Altera unit, which Intel has begun spinning off as a subsidiary, is one potential candidate for sale, with infrastructure chipmaker Marvell identified as a possible buyer.
This board meeting is crucial for Intel, which is struggling to execute the second phase of its turnaround strategy amid leadership gaps and investor dissatisfaction. Decisions will likely shape Intel’s future and determine which businesses remain central to its operations as it attempts to restore its position in the semiconductor industry.
