Intel Considers Spin-off or Sale of Foundry Business

Key Takeaways

• Intel is reportedly having discussions around the possible spin off or sale of its foundry division, which makes chips for other companies.
• The company’s stock is down 60% this year, making it the second-worst performing component of the S&P 500 index.
• The company reported a second-quarter loss of $1.6 billion, and analysts expect a $1 billion loss this quarter.

A report that Intel Corp. (INTC) is considering the spin-off or sale of its foundry business lifted the tech giant’s stock Friday. Shares of Intel rose nearly 8% following the Bloomberg report, which cited people familiar with the matter. An Intel spokesperson declined to comment.

Intel’s foundry business makes chips for outside companies. A move isn’t likely in the immediate term, however, with multiple options expected to be presented at a September board meeting, the report said.

Recent Struggles

Intel stock is down 60% in 2024, making it the second-worst performing stock among the S&P 500 index.

On August 1, the company said it would lay off 15% of its workforce alongside disappointing quarterly results, which sent shares to their lowest level since 2013. Intel posted a second-quarter net loss of $1.6 billion, and analysts expect another $1 billion in losses this quarter, according to the Visible Alpha consensus.

Reports last week said that Intel’s progress on constructing two new chip fabrication facilities in Germany may be stalled.

Intel’s sliding shares have pushed its market value below a number of other chip giants. That’s a far cry from 2021, when CEO Pat Gelsinger took the reins and the company dwarfed competitors like Nvidia.

Intel, one of the world’s largest semiconductor chip manufacturers, is facing significant challenges in the market. The company’s stock has plummeted by 60% this year, making it the second-worst performing component of the S&P 500 index. This decline has prompted Intel to consider strategic options, including the spin-off or sale of its foundry business.

The foundry business is responsible for manufacturing chips for external companies. While Intel has not made any immediate decisions, discussions are underway, and multiple options are expected to be presented at a board meeting in September. The potential spin-off or sale of the foundry division has generated optimism among investors, leading to an 8% increase in Intel’s stock following the Bloomberg report.

Intel’s recent struggles can be attributed to a series of disappointing financial results and operational setbacks. In August, the company announced plans to lay off 15% of its workforce in response to poor quarterly results. These results included a net loss of $1.6 billion in the second quarter, and analysts predict an additional $1 billion loss in the current quarter.

Furthermore, reports suggest that Intel’s progress in constructing two new chip fabrication facilities in Germany has encountered obstacles, potentially delaying their completion. These challenges have further contributed to the decline in Intel’s stock and market value.

Intel’s current market value is now lower than that of several other chip giants, marking a significant shift from its dominant position in 2021. When CEO Pat Gelsinger assumed leadership, Intel surpassed competitors like Nvidia. However, the company’s recent struggles have eroded its market position and raised concerns about its future prospects.

As Intel explores strategic options for its foundry business, the outcome of the September board meeting will be closely watched by investors and industry observers. The potential spin-off or sale of the division could have far-reaching implications for Intel’s future direction and its ability to compete in the semiconductor market.

Overall, Intel’s consideration of a spin-off or sale of its foundry business reflects the company’s efforts to address its current challenges and regain its competitive edge. While the immediate impact of this decision remains uncertain, it represents a significant development in Intel’s ongoing transformation and underscores the evolving dynamics of the semiconductor industry.

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