Intel CEO will reportedly present plans to cut assets at an emergency board meeting — chipmaker may put $32B Magdeburg plant on hold and sell off Altera
Pat Gelsinger's Intel woes continue.
According to Reuters reports, Intel's CEO Pat Gelsinger and other key executives are to present their plan to trim Intel's fat and course-correct the company. The meeting will focus on removing assets and reducing costs, with items of discussion apparently including Intel's upcoming Magdeburg, Germany fab and its ownership of Altera.
Intel announced a $1.6 billion loss in its now-infamous August 1 earnings call, which also carried the news that Intel had laid off 15% of its workforce and aims to reduce spending by $10 billion by 2025. The loss came thanks to Intel's falling behind in the AI arms race and its 13th/14th-generation widespread CPU failures. Intel stock had its worst day in 50 years immediately following the call, and the company has continued to suffer in the month since. Chip industry legend Lip-Bu Tan resigned from the board of executives, resulting in a 6% drop in Intel stock and a significant lack of industry experience.
Significant changes to Intel were always likely to reverse this major downturn, but recent reports reveal that Gelsinger's plans may include seriously drastic measures. Construction on Intel's upcoming Magdeburg chip fab is expected to be paused or canceled, leaving the $32 billion project unfinished. Magdeburg's local government has already begun drafting plans in case Intel withdraws its commitment to the project.
Intel is also likely to sell off its ownership of Altera, its programmable chip business, which is currently a fully spun-off company owned solely by Intel. Altera has been an industry fixture for decades, with Intel investing heavily in reviving Altera after acquiring the company in 2015. Altera has been a part of Intel's broad market strategy for ten years but is likely to be entirely sold off to another interested chip manufacturer in the coming months.
Unsurprisingly, Intel is not expected to entertain discussion about spinning off or selling its Intel Foundry wing. Intel's contract foundry business, one of Intel's most significant expenses, has been kept distinct from the rest of Intel's business since Q1 2024 and is considered a tentpole part of Intel's future. Two separate sources have confirmed that Intel will not propose any plans to sell its foundry wing to TSMC or another similar buyer, keeping it around for the day it is hopefully as profitable as Gelsinger believes it can be.
Intel's sharp decline can be attributed to several factors. Lip-Bu Tan reportedly blamed his exit from Intel on a bloated workforce, and Gelsinger blamed expenditures across the board as a major problem. Intel is still mired in issues related to the instability and failure rate of 13th and 14th Generation CPUs, which could lead to permanent chip damage. Tech media heavily reported Intel's lethargic response to a disastrous product failure, leading to increased public distrust of Intel's brand. While selling off companies will help quell Intel's bleeding out; the company has a long road ahead to stability.
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Dallin Grimm is a contributing writer for Tom's Hardware. He has been building and breaking computers since 2017, serving as the resident youngster at Tom's. From APUs to RGB, Dallin has a handle on all the latest tech news.
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Neilbob But hey, at least AMD is in the rear-view mirror. Whee!Reply
Sorry, I couldn't help it. But it is an appropriate reminder to never, ever take the statements of a CEO too seriously. ANY CEO. -
ekio I hope the corporate will have the decency of decreasing their salary by a factor of at least 10, their work has been such a failure. They should even quit on their own an apologize to the staff.Reply -
-Fran- Bean counters needing that short term money to bail out the shareholders, so they can cash out and shorten Intel into nothingness. Well, that could be a potential extreme, but that's how it would roll if Intel didn't have anything left, which I'd say they have plenty left to survive.Reply
Sad to see Intel being stripped appart to cover the incompetence of the current c-suite managers at the company, but that is what happens when you have no real leadership for a while. After Otelini left, it was pretty much every person on their own, it looks like. Zero corporate responsability and accountability. I mean, just look at BK's exit. That was a real crapshoot.
Regards. -
hotaru251 to be fair..any mega corp on top 500 list should be required to slash the top heads pay before selling off/fireing ppl in mass.Reply
You should never reward the top brass for their failure in leading a company properly. -
Thunder64 Good thing they did all those stock buybacks rather than invest that money into R&D or their workers, or fabs? Anything really.Reply -
bit_user
Yeah, they simply inflated a stock price that they're now having to take desperate measures to prop up. If they'd done as you said, then the stock would've languished more in the short term, but the long-term health of the company would be better.Thunder64 said:Good thing they did all those stock buybacks rather than invest that money into R&D or their workers, or fabs? Anything really.
IMO, the vesting schedules of executives' stock options needs to be longer, so they take a more long-term focus on the company's health. Boards will never do that, because boards represent investors' interests and investors are too short-term focused, these days. It would probably take the SEC to issue such a ruling. -
Dustyboy1492 Seems necessary, the foundry side has more employees than TSMC and the design side has more employees than AMD or Nvidia, something needs to give. Cut the side projects and get lean, focus on the core business and bringing up the new fabs.Reply -
DavidLejdar If I were on Intel's board of directors (such as appointed by an emergency shareholders' meeting), I would remind everyone there, that by end of June, year-on-year revenue was up 1.99%, compared to the previous year. And $55B may not seem much, compared to the $79B at the end of 2021. What is interesting though, is that $55B is as much yearly revenue as at the end of 2015. Yet, while at end of 2015 the gross profit was $34B, at the end of last June it was less than $23B.Reply
And before hitting an eject or self-destruct button, that's something that would seem worth a closer look at. Like, did the production costs increase heavily, and that perhaps due to inflation? Did U.S. import duties, and/or export restrictions, have an impact on business? I.e. when Intel China had import/export with Intel elsewhere, did the like company supply lines get affected? And stuff like that.
After all, if Intel wants to stay global, that requires some attention. You know, instead of perhaps just relying on that AI is going to carry the day, despite not really (yet) offering that a strong argument about why one would want to upgrade e.g. to a new laptop (or buy the more expensive one), just because of some MS Copilot feature, when the old laptop just works fine for the few office applications, and in a climate of layoffs at that, while these layoffs may perhaps not be that necessary, when there would be more focus on the business-side of the business.
I.e., people like practical, right? And how practical would it be, if there was a long box (with CPU, iGPU, NVMe), that could easily be plugged in e.g. behind the screen from above? I mean, that may perhaps get a perplexed reaction from a focus group (in market research). But, not every desktop user is necessarily a gamer, or is a gamer, but not at work. And thanks to NVMe, less space needed. So, what could technically be offered, is that one doesn't need more space than e.g. for an 27- or 32-inch screen, to be able to run a desktop setup (with iGPU) - and with less cables at that... just one power-plug, and USB ports at the foot of the screen. -
bit_user
Has TSMC surpassed Intel's wafer volume, yet?Dustyboy1492 said:Seems necessary, the foundry side has more employees than TSMC
Also, Intel has done their own in house EDA tools, whereas TSMC works with partners like Synopsis. It's possible TSMC also outsources other things that Intel does in house, so the numbers might not be exactly comparable.
Is that counting Altera and MobilEye? Also, exactly when were these numbers taken? For AMD's part, do they include Xilinx?Dustyboy1492 said:the design side has more employees than AMD or Nvidia, something needs to give.
I've only heard of Gelsinger cutting projects and selling things off, since he came on board. They haven't gotten into any new businesses or started any major new projects, since then. That's why they're at the point of having to dump assets, now. There's not much more they can cut which doesn't affect their core strategy.Dustyboy1492 said:Cut the side projects and get lean, focus on the core business and bringing up the new fabs. -
vanadiel007 Well, there's always the option to form a joint venture with AMD and compete against Nvidia.Reply
I bet nobody would have seen that one coming.