As new CEO Lip-Bu Tan tries to streamline operations, Intel announced that it has started the process of finding investors and plans to split its networking and communications division into a stand-alone business.
Tan's strategy to revitalize the formerly legendary chipmaker centers on selling off non-core assets and decreasing costs by reducing significant investments and staffing levels.
In April, Intel consented to sell Silver Lake, a buyout company, the majority of its Altera programmable chip business for approximately $8.75 billion, which is over half of the amount it spent for the company in 2015.
After years of mistakes and high-capital manufacturing tactics resulted in increasing losses, Tan was assigned the task of reviving the chipmaker, which is currently struggling to gain traction in the rapidly expanding AI sector.
Friday saw a nine percent decline in Intel's stock after the chipmaker threatened to stop producing chips if it couldn't land a significant client. Additionally, it predicted a larger-than-expected loss in the third quarter and disclosed a surprise adjusted loss in the second quarter.
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Intel integrated NEX into its data center and PC group in the most recent first quarter and does not report its earnings as a distinct segment.
According to securities filings, the telecom equipment chip manufacturing segment made $5.8 billion in 2024. That made up roughly 11 percent of the business's overall sales.
Additionally, after Chief Executive Officer Lip-Bu Tan raised suspicions that he was more concerned with cutting costs than regaining the chipmaker's technological edge, shares of Intel Corp. fell 8.5 percent on Friday.
Tan stated that Intel will halt some plant projects and adopt a more frugal expenditure strategy going forward in the company's second-quarter report. The investments made by his predecessor, Pat Gelsinger, were deemed exorbitant and foolish by Tan.
Tan, however, found it difficult to provide a clear image of how he would restore the company's competitiveness. Gelsinger had set out to transform Intel into a chip foundry, a company that produces goods for external customers. Moving toward a more sophisticated production method known as 14A was a crucial component of it. However, Tan hinted on Thursday that Intel would only hesitantly introduce that technology.
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Tan stated on the call that the company will add large-scale capacity for 14A once he is certain he has enough customers who are committed to adopting it. Investors weren't happy with that, and on Friday, the stock saw its largest one-day drop in almost three months, plunging to $20.70 in New York.
Tan is concentrating on organizing Intel's finances, which has involved reducing capital expenditures and laying off thousands of employees. Progress at another project in Ohio will be hampered, the business announced Thursday, while already-paused plants in Poland and Germany will not proceed.
Tan, who became CEO in March, admitted that he still needs to improve the company's competitiveness in its primary businesses, which include server and personal computer processors. Additionally, he is still developing Intel's strategy to disrupt the AI chip market, which is dominated by Nvidia.