Intel’s CEO Prepares to Pitch Radical Cost-Cutting and Asset Sale Strategy to Board

Intel CEO Pat Gelsinger, along with other top executives, is preparing to present a plan later this month to the company’s board of directors aimed at shedding non-core assets and revamping capital spending in an effort to revive the fortunes of the once-dominant chipmaker, according to sources familiar with the matter.

The proposal, to be discussed at a mid-September board meeting, includes ideas on cutting overall costs by selling businesses that Intel can no longer afford to support with its reduced profits.

They could save even more money if they cut the CEO.

— Ronnie Hudson (@RonnieHudson68) September 1, 2024

One such asset under consideration for sale is the programmable chip unit Altera, which Intel acquired in 2015 for $16.7 billion.

The planned presentation comes at a time when Intel is enduring one of its worst financial periods, as it struggles to compete in the AI era against rivals such as Nvidia, whose market capitalization stands at $3 trillion.

In contrast, Intel’s market value has plummeted to below $100 billion following a dismal second-quarter earnings report in August.

$intc $csco $hp used to be dream jobs.

Now these are bureaucratic graveyard of talent.

Result: Brutal death of these American icons.

— onlytruth (@onlytruthtb) September 2, 2024

In response to these challenges, Intel’s executives are considering further reductions in capital expenditure, including potentially pausing or completely halting the construction of a $32 billion factory in Germany, a reportedly delayed project.

The proposal’s details are still not finalized and could change before the meeting. As part of its efforts to restructure, Intel has already separated its foundry business from its design business, reporting financial results for these segments independently since the beginning of this year.

This move is intended to maintain a clear boundary between the design and manufacturing operations to protect the confidentiality of its customers’ technology secrets.

Imagine wanting to make money from selling “computer chips”
seems a pipe dream at best.

— Furuhata Ninzaburo (@failedweeb) September 2, 2024

Intel has retained financial advisors Morgan Stanley and Goldman Sachs to guide the board on which businesses should be sold and which should be retained. While the company has not yet solicited bids for any product units, it will likely do so once the board approves the proposed plan.

A semiconductor company taking advice from two investment banks on how to fix their company. What could go wrong??

— futureman (@futureman1977) September 2, 2024

A major point of discussion at the upcoming board meeting is expected to be the potential spin-out or sale of the Altera unit. Intel has already taken steps to separate Altera into a wholly-owned subsidiary and has suggested selling a portion of its stake in an initial public offering, although no date has been set.

However, there is also a possibility that Altera could be sold entirely to another chipmaker looking to expand its portfolio. One potential buyer mentioned is infrastructure chipmaker Marvell.

Interesting. Altera was what Intel used to bandy about as their GPU killer.

— Vivek Ponnaiyan (@viveksworld) September 2, 2024

The mid-September board meeting is viewed as a critical juncture for Intel. The company’s second-quarter results in August were notably poor, leading to a 15% reduction in staff and the suspension of dividend payments to save $10 billion.

In the wake of these financial challenges, veteran board member Lip-Bu Tan resigned after months of debate over the company’s future direction, leaving a gap in semiconductor business experience on the board.

Gelsinger emphasized that Intel is “taking seriously” investors’ concerns and that the company is focused on phase two of its turnaround plan.

However, some aspects of these plans will remain unresolved until the mid-September meeting, when the board is likely to make key decisions about which businesses Intel will keep and which it will shed.

They should absolutely scrap the German fab plans. Complete waste of money and doing business in Europe is 10x the headache that it’s worth

— reznoir applebees (@ReznoirA) September 2, 2024

In addition to discussing the future of Altera, the board is expected to explore various options, including a potential split of Intel’s product design and manufacturing businesses.

Bloomberg has reported that this possibility will also be a topic of discussion during the board meeting.

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