Intel Chief Executive Pat Gelsinger and key executives will present a plan to the company’s board of directors later this month to eliminate nonessential businesses and improve capital spending as they try to revive the fortunes of the once-dominant chipmaker, according to a source familiar with the matter.
The plan will include consideration of how to cut overall costs by selling off businesses, including its programmable chip unit Altera, which Intel can no longer finance with the company’s once-huge profits.
The same source said Gelsinger and other top Intel executives would present the plan at a board meeting in mid-September.
Gelsinger’s proposal is detailed here for the first time.
Intel declined to comment.
The proposal does not yet include a plan to split up Intel and sell its contract manufacturing operations or foundries to a buyer such as Taiwan Semiconductor Manufacturing Co., according to the source and another person familiar with the matter.
The presentation, including plans for manufacturing operations, has not yet been finalised and may change before the meeting.
Intel has already separated its foundry business from its design business, and has been reporting its financial results separately since the first calendar quarter of this year.
The company has built a wall between the design and manufacturing businesses to ensure that potential customers of the design division do not have access to technology secrets of customers that use Intel’s factories, known as fabs, to make their chips.
Intel is going through one of its worst times as it tries to hold on in the AI era against companies like Nvidia, which is the leading AI chipmaker with a market capitalization of $3 trillion. In contrast, Intel is now valued below $100 billion after its 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 spending on factory expansion. The proposal could include plans to pause or completely shut down its $32 billion factory in Germany, a project that has reportedly been delayed, the source said.
In August, Intel said it expected to cut capital spending to $21.5 billion by 2025, down 17% from this year, and issued a weaker-than-expected third-quarter forecast.
In addition to the CEO and executive plans, Intel has also hired Morgan Stanley and Goldman Sachs to advise the board on which businesses Intel can sell and which it needs to retain, according to two sources with knowledge of the company’s consulting plans.
Intel has not yet sought bids for the product units but will do so once the board approves the plan, according to two sources familiar with the company’s consulting plans.
Altera spin-out
The board meeting in mid-September is a crucial one for Intel, once a chipmaking behemoth. Intel reported poor second-quarter performance in August that included halting the company’s dividend payment and cutting 15% of its workforce, aimed at saving $10 billion.
A few weeks later, chip industry veteran Lip-Boo Tan resigned from the board after months of debate over the company’s future, leaving the board lacking deep experience in the semiconductor business, Reuters reported.
Following the Reuters report last Thursday, Gelsinger attempted to reassure investors about the company’s weak financial performance.
“The last few weeks have been very difficult. And we are working hard to solve the problems,” Gelsinger said at a Deutsche Bank conference.
Gelsinger said the company is “taking investors’ comments seriously” and that Intel is focusing on the second phase of the company’s turnaround plan.
Some of these plans will remain unresolved until a meeting in mid-September. After that, the company’s directors will likely make key decisions about which businesses Intel will keep and which ones it will exit.
One potential unit the company might look to sell is its programmable chip business, Altera, which Intel acquired 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 a portion of its stake in an initial public offering in the future, though it has not set a date.
But Altera could also be sold entirely to another chipmaker interested in expanding its portfolio, and the company has quietly begun exploring whether a sale would be possible, said a source familiar with its consulting plans and plans to cut back on the business.
Infrastructure chip maker Marvell is a potential buyer for such a transaction, according to one source.
Bloomberg previously reported various options for Intel, including a possible split of Intel’s product design and manufacturing businesses, which is expected to be discussed at the board meeting.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)