Intel Corp. is grappling with unprecedented difficulties in its 56-year history, prompting the company to enlist the help of investment bankers to explore strategic options, according to sources familiar with the situation.
Exploring Strategic Alternatives
The company is considering several scenarios, including a potential separation of its product-design and manufacturing divisions and the possible cancellation of certain factory projects. Morgan Stanley and Goldman Sachs Group Inc., Intel’s long-standing advisors, are assisting with these discussions, which also encompass potential mergers and acquisitions. The urgency of these deliberations has intensified following a recent earnings report that caused Intel’s shares to plummet to their lowest level since 2013.
Board Meeting and Future Options
The various strategic options are anticipated to be reviewed during a board meeting scheduled for September. However, no major decisions are expected to be made immediately, as discussions are still in the early stages. Intel has declined to comment on the matter, and representatives from Morgan Stanley and Goldman Sachs have not yet responded to requests for comment.
Potential Changes in Business Strategy
A possible separation or sale of Intel’s foundry division—intended to manufacture chips for external customers—would represent a significant shift for CEO Pat Gelsinger. Gelsinger has considered this business crucial for restoring Intel’s competitive position in the chip industry, aiming to rival companies like Taiwan Semiconductor Manufacturing Co. However, it is more likely that Intel will take less drastic measures in the near term, such as postponing some expansion projects. The company has previously engaged in project financing arrangements with Brookfield Infrastructure Partners and Apollo Global Management.
Challenges for CEO Pat Gelsinger
Pat Gelsinger, who returned to Intel in 2021 with a mission to reclaim the company’s technological leadership, is facing mounting pressure. Despite his efforts to expand Intel’s manufacturing capabilities, the company has been experiencing declining sales and substantial losses. Intel reported a net loss of $1.61 billion last quarter, with analysts forecasting continued financial struggles for the coming year. Under Gelsinger’s leadership, Intel has sought to reverse the market share losses and reputation for innovation that had accumulated under previous CEOs.
Conclusion
As Intel navigates one of the most challenging periods in its history, the company is exploring significant strategic options to address its current difficulties. The outcomes of these discussions will be critical in determining the future trajectory of the semiconductor giant.
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