Intel in Talks for Foundry Business Spin-Out
According to a recent report from Bloomberg, Intel is engaging in discussions with investment banks regarding a possible spin-out of its foundry business. The company is considering various strategic options to manage the downturn highlighted in its Q2 2024 earnings report. Despite its revenues still being substantial, Intel has reported a staggering $1.61 billion net loss, primarily due to reduced profitability. CEO Pat Gelsinger is actively exploring ways to control these financial losses and steer the 56-year-old tech giant back to profitability.
Advisory from Goldman Sachs and Morgan Stanley
Goldman Sachs and Morgan Stanley are reportedly advising Intel as it navigates its future moves concerning the foundry business and overall operations. The foundry unit has become a significant drain on Intel’s resources, with the expansion plans in the US and Europe consuming billions of dollars. Although Intel has received various state subsidies for building semiconductor manufacturing facilities, it still needs to deploy a significant amount of its own capital. Given the current financial strain, some non-essential expansion plans may be scrapped to mitigate further losses.
Potential Spin-Out or Sale of Foundry Business
Running the foundry business has proven costly for Intel, with the Q2 2024 report indicating a negative 65.5% operating margin. The possibility of separating Intel’s product and foundry divisions, or even selling the foundry business entirely, is under consideration. The company’s decision on this matter remains uncertain and awaits clarification. During the Deutsche Bank Technology Conference on Thursday, Pat Gelsinger acknowledged the challenging period for Intel, mentioning layoffs and cost-saving measures as part of the efforts to manage the crisis.
