Intel Plans To Slash Capital Spending, Altera Likely To Be Sold
Intel to present strategic plan in upcoming board meeting regarding sale of Altera unit, capital spending cuts and focus on core operations
Intel Corporation is to present a strategic revamp to its board of directors later this month. According to sources familiar with the situation, CEO Pat Gelsinger and other top executives will unveil a strategy to exit underperforming businesses and slash capital spending in an effort to resuscitate the company's fortunes.
Intel is considering selling its programmable chip unit, Altera, which it purchased for USD 16.7 billion in 2015. The company, which has failed to stay up with competitors such as Nvidia in the AI chip industry, is trying to offload non-essential companies to improve its financial situation.
The suggested approach, to be reviewed at a board meeting in mid-September, intends to drastically reduce overall expenditures. Intel has already hired financial advisors Morgan Stanley and Goldman Sachs to investigate potential purchasers and determine which operations should be kept. While no bids have been asked yet, the corporation will most likely seek them after getting board permission.
Manufacturing And Capital Spending Revisions
Another significant component of the proposal is a review of Intel's capital expenditures on manufacturing expansion. The business, which has already experienced delays in its USD 32 billion plant project in Germany, may opt to pause or cancel the venture altogether. Intel has declared plans to reduce capital expenditures to USD 21.5 billion by 2025, a 17 per cent reduction from this year.
Intel has also taken moves to separate its foundry and design businesses, disclosing financial results independently beginning the first quarter of this year. This change is meant to protect customer technology secrets and optimise processes as Intel strives to recruit more customers for its manufacturing services.
Challenges And Future Directions
The upcoming board meeting will be critical for Intel as it navigates one of the most difficult moments in its history. In August, the firm announced a dismal second quarter, prompting a delay in dividend payments and a 15 per cent reduction in staff, with the goal of saving USD 10 billion. The resignation of board member and industry veteran Lip-Bu Tan has heightened the concern about Intel's future.
Intel's turnaround strategy focusses on the second phase of restructuring initiatives. CEO Pat Gelsinger recently addressed investors at a Deutsche Bank conference, admitting the company's issues and emphasising its determination to make essential adjustments.
Potential Sale Of Altera And Other Units
Intel's plans to potentially sell Altera may represent a substantial shift in the company's strategy. While the programmable chip business was originally spun off as a wholly-owned subsidiary with intentions for an IPO, Intel is now considering a full sale to increase its financial flexibility. Marvell, an infrastructure chipmaker, has been identified as a potential acquirer, though conversations are still in their early stages.
Intel's move to sell from certain units and refocus its efforts on core businesses may offer the much-needed impetus to restore its position in the competitive semiconductor market. However, much will be determined by the decisions made at the upcoming board meeting, as well as the company's ability to carry out its turnaround strategy efficiently.
Intel's restructuring comes at a time when the semiconductor business is rapidly changing due to advances in AI and other emerging technologies. The company's troubles are reflective of larger issues confronting traditional chipmakers as they adjust to new market realities.
The conclusion of the mid-September board meeting could have consequences not only for Intel, but also for the semiconductor industry as a whole, as businesses rethink their strategies to remain competitive in an increasingly dynamic market.
