Intel Chief Executive Pat Gelsinger and top executives are expected to present a plan later this month to the company’s board of directors to reduce redundant businesses and revamp capital spending, according to a source familiar with the matter, as they try to revive the once dominant company. the fortune of the chip maker.
The plan will include ideas on how to reduce overhead costs by selling businesses, including its Altera programmable chip unit, that Intel can no longer afford to finance from the company’s former profits.
Gelsinger and other high-ranking Intel executives are expected to present the plan at a board meeting in mid-September, the same source said.
Details of Gelsinger’s proposal are reported here for the first time.
Intel declined to comment.
The proposal does not yet include plans to break up Intel and sell its contract manufacturing operation, or foundry, to a buyer such as Taiwan Semiconductor Manufacturing Co., according to the source and another person familiar with the matter.
The presentation, including plans about its manufacturing operations, have not yet been finalized and may change prior to the meeting.
Intel has already separated its foundry business from its design business and has reported its financial results separately since the first calendar quarter of this year.
The company has erected a wall between the design and manufacturing businesses to ensure that potential customers of the design division will not have access to the technology secrets of the customers who use Intel’s factories, known as fabs, to produce their chips.
Intel is suffering through one of its worst periods as it tries to play catchup in the AI era against Nvidia NVDA.O, the dominant AI chipmaker with a $3 trillion market capitalization.
In contrast, Intel now sits below $100 billion after a disastrous second-quarter earnings report in August.
The proposal that Gelsinger and others will present is likely to include plans to further reduce the company’s capital expenditures for factory expansion.
The pitch could include plans to halt or completely halt its $32 billion plant in Germany, a project said to be delayed, the source said.
In August, Intel said it expects to cut capital spending to $21.5 billion in 2025, down 17% from this year, and issued a weaker-than-expected forecast for the third quarter.
In addition to the CEO and executive plans, Intel has retained Morgan Stanley and Goldman Sachs to advise the board on which businesses Intel can sell and what it should keep, according to two sources with knowledge of the company’s advisory plans.
Intel has not yet solicited bids for the product units, but is likely to do so after the board approves a plan, according to two sources familiar with the company’s advisory plans.
ALTERA SPIN OUT
The mid-September board meeting is crucial for the one-time chipmaker king. Intel reported a disastrous second quarter in August, which included halting the company’s dividend payments and a 15% cut in staff aimed at saving $10 billion.
Weeks later, chip industry veteran Lip-Bu Tan resigned from the board after months of debate over the company’s future, Reuters reported, creating a vacuum of deep semiconductor business experience on the board.
Last Thursday, after the Reuters report, Gelsinger tried to reassure investors about the company’s poor financial performance.
“It’s been a tough few weeks,” Gelsinger said at a Deutsche Bank conference. “And we’ve been working hard to address the issues.”
Gelsinger said the company is “taking seriously” what investors have been saying and that Intel is focused on the second phase of the company’s turnaround plan.
Some of these plans will remain unresolved until the mid-September meeting. The company’s directors are then likely to make crucial decisions about which businesses Intel will keep and which it will shed.
One possible unit the company could look to offload is its programmable chip business, Altera, which Intel bought for $16.7 billion in 2015.
Intel has already taken steps to spin it off as a separate but still wholly-owned subsidiary and has said it plans to sell some of its shares in an initial public offering in the future, although it has not set a date.
But Altera could also be sold entirely to another chipmaker interested in growing its portfolio, and the company has quietly begun exploring whether a sale would be possible, according to a source familiar with its advisory plans and one of the sources familiar with plans to cut businesses.
Infrastructure chipmaker Marvell is a potential buyer for such a transaction, according to one of the sources.
Bloomberg earlier reported various options for Intel including a possible split of Intel’s product design and manufacturing businesses expected to be discussed at the board meeting.
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