Intel\'s financial problems prompt careful scrutiny of its fab business

Intel has been experiencing rather turbulent times in the past 5 years, but the situation appears more problematic especially after the latest earnings call. Bloomberg analysts point out that Intel saw the worst share decline in 40 years, with share price taking a ~55% dive this year from just above $50 to now only $22. With the sharp decline recorded after the Q2 financial report, Intel’s valuation crashed to $94 billion and it is currently the 182nd largest company by market cap. Intel was recording three times higher revenues compared to Nvidia just three years ago, but Team Green has seen tremendous growth ever since and is poised to rake in double Intel’s revenue this year.

Sources close to Bloomberg inform that Team Blue together with top investment banks like Morgan Stanley and Goldman Sachs are already discussing possible solutions that could help the company regain its footing. Some of the more radical plans include splitting the R&D and the manufacturing sides, yet it is more likely that Intel would only cancel the launch of certain new factory sites. Intel already cut 15,000 jobs and suspended the dividend distribution as immediate measures after the sharp share drop.

Rumors about a possible spinoff of Intel’s foundry division started making the rounds back in 2021. This will probably remain a last resort plan. Meanwhile, CEO Pat Gelsinger implemented a plan to open the foundries to external customers, and up until now Intel only managed to strike a few deals, with the most important being the Qualcomm (canceled) and MediaTek ones. Still, the strategy is far from profitable, as Intel reported $2.8 billion operating losses for the foundry business in Q2 this year. On top of all this, the desktop CPU market share is also declining as AMD now profits from the core stability issues prevalent with the 13th and 14th gen Raptor Lake high-end CPUs.

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