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Over the past few quarters, after each significant drop in the stock price, Intel investors have asked the familiar question: Is this the bottom? But each time, the answer has been no.
Now, given the dire situation at Intel, which has seen its market capitalization fall below the psychologically relevant $100 billion level, investors are once again pinning their hopes on a critically important board meeting in September to halt the company’s seemingly perennial decline and begin the arduous process of a sustainable recovery.
We received our first clue as to a major recovery plan that is reportedly underway this Friday, when Bloomberg reported that Intel was working with several financial advisers, including Wall Street giant Morgan Stanley, to develop strategic options for its upcoming board meeting.
According to other reports, these advisors are also helping Intel fend off a high-profile attack from activist investors, who understandably remain extremely unhappy with the current turmoil within the company.
This brings us to the heart of the matter. According to the latest reporting According to Reuters, Intel plans to launch the sale of its Altera FPGA unit at its next board meeting as its intrinsic profits are no longer sufficient to sustain Altera’s operations. Another option that remains on the table is freezing construction of Intel’s $30 billion German unit, which aligns with the chipmaker’s previously disclosed plans to cut its capital expenditure by 17% in 2025 to just $21.5 billion.
Interestingly, Reuters is currently reporting that Intel will not launch a sale of its chipmaking business at its next board meeting. This, again, is understandable, especially since Intel has already received billions of dollars amount of federal funding to establish a sizable manufacturing presence in the U.S., which complicates a potential divestment strategy.
Keep in mind that Intel is currently focusing on its Foundry unit to drive margin growth. The company expects continued expansion of the unit to result in cost savings of “more than $8 billion to $10 billion by 2025,” which should enable a non-GAAP gross margin of about 60 percent and non-GAAP operating margins of about 40 percent by 2030.
However, given Intel’s situation, the chipmaker may have no option but to seek to divest its chip manufacturing unit.
Meanwhile, as we reported In a post earlier this week, Lip-Bu Tan, a high-ranking member of Intel’s board, now resignedciting the board’s reluctance to listen to his ideas for making Intel’s contract manufacturing business more customer-centric and removing layers of bureaucracy that induce inertia, including an army of middle managers who stifle innovation in the company’s desktop and server divisions.