Intel Corp. Chief Executive Pat Gelsinger is expected to present a plan to the company’s board of directors this month that will outline the next steps of its ongoing restructuring, as it looks to revive its flagging chipmaking business.
The company, which was formerly widely regarded as the biggest chipmaker in the world, has seen its fortunes dwindle in recent years after falling behind rivals such as Nvidia Corp. in the artificial intelligence industry. It has also faced increasing competition from Advanced Micro Devices Inc. in its traditional markets – chips for personal computers and data center servers.
A report from Reuters today said Gelsinger and other top executives at the company are drawing up a blueprint for the future that will likely involve selling its programmable chip business Altera. In addition, the plan might see Intel cut back on its factory ambitions. An unnamed source told Reuters that Intel may pause or scrap an existing plan to build a $3.2 billion chip manufacturing plant in Germany.
Last week, Bloomberg reported that Intel may be looking to sell its nascent foundry business, which manufactures semiconductors for other chipmakers. Intel’s stock jumped more than 10% on Thursday after that report was published, even though the plan to become a contract manufacturer was previously thought to be a major element of Gelsinger’s revival strategy.
Reuters’ sources said the sale of the foundry unit is not yet part of Gelsinger’s proposal, though since the plan has not yet been completed, it could change before it’s presented to the company’s board of directors in mid-September.
Intel has already taken steps toward a possible sale, having split the foundry unit from its main chip design business. The two units have been reporting financial results separately since the first quarter of the current fiscal year. Analysts say that was done to separate the two businesses, in order to reassure customers of Intel’s design division that no one involved in the foundry business will have access to their secret chip designs.
Meanwhile, the Altera unit, which was acquired by Intel for $16.7 billion in 2015, is likely to be sold, the sources said. As with the foundry business, Intel has already made moves toward a sale, spinning the unit out as a separate but still wholly owned subsidiary. The company has previously said it might sell off part of Altera through an initial public offering, though it has never set a date for this.
But rather than list the unit on the stock market, Intel might simply try to sell it off in its entirety to another chipmaker, Reuters said today. Executives have reportedly began sounding out prospective buyers of the unit, and Marvell Technologies Inc. has been touted as a possible option.
Intel has been struggling to turn around its business for years, but the efforts made so far have failed to achieve the kind of results Gelsinger and the company’s shareholders had hoped for. While Nvidia now enjoys a market capitalization of over $3 trillion, Intel’s has fallen below $100 billion following a dismal second quarter earnings report last month. In the year to date, Intel’s stock has fallen about 56%.
Last month, in its earnings call, Intel announced it will suspend its dividend for shareholders and cut its workforce by 15%, as part of a plan to save about $10 billion in costs. That came after it revealed a net loss and followed with a disappointing forecast for the current quarter.