Intel - What would an activist push to unlock value?
Calling out the HF people with a not as evident issue for me (total beginner), as follows:
Intel has been struggling to regain its dominance in the semiconductor industry, with competitors like TSMC and AMD outpacing it in both process technology and market perception. While the company is making significant investments in R&D and domestic manufacturing, its stock performance suggests the market remains skeptical.
If you were running an activist campaign on Intel, what would you push for? Would it be a pure focus on capital allocation—cutting unprofitable divisions, divesting non-core assets, or changing the way R&D is structured? Or does the issue run deeper in areas such as corporate governance, leadership changes, or even a breakup of the company? My issue is that I don't see much to be done besides maybe stripping the company apart and selling it meanwhile it still has some sort of brand value perceived by potential buyers.
Would love to hear thoughts on what’s missing from their turnaround efforts (if any) or any other unique views you may have.
(side note: -was tempted to get the stock at $26 around 1.5-2 years ago hoping it was something temporary, but it seems the issue they face are somehow permanent).
anyone who's been following the semis space knows that it's not as easy to turnaround a sinking ship like Intel. The design business is losing market share and faces increasing competition in both PCs and CPU servers (both historically dominant markets), and they've absolutely dropped the ball on their AI accelerators and are so far behind AMD and NVDA. On the other hand foundry continues to be a capital black hole with all the investments done needed to get to the latest process node (they just delayed filling up the latest fabts) still in question as Intel has seen little momentum in building out an external customer base and still heavily relies on their design side for utilization of the fabs. Separatign the two parts would probably unlock some value by allowing leadership to refocus on the design space which isn't exactly a bad buiness but that would mean admitting defeat on the IDM 2.0 strategy, and turning foundry into a mature node foundry like GlobalFoundries and completely exiting the leading edge race all together. They're already doing everything as it relatest to cost cutting, selling non-core assets etc. but you can only go so far before talent starts to voluntarily leave and i imagine it's hard to recruit great talent right now given the last place you'd want to be here is Intel...
Very solid perspective — chapeaux. Would add that the entanglement in China and looming tariff wars (even if proving just a bargaining chip) are adding to complexity and esp. uncertainty — and the market hates nothing more than uncertainty.
To OP: as for HF / distressed PE, Apollo is circling several assets there, in addition to the foundry JV, so I guess people still see value in it. Not free of hair though, that’s for sure…
Agree with the above commenter. The situation is quite dire; Intel has lost both of its legacy moats (x86 and foundry dominance). Pat Gelsinger was probably the only CEO in the world that could have brought back foundry dominance, but the board and certain investors got impatient with the amount of CapEx/R&D being spent and had Pat fired. I think their thesis was that Intel was undervalued on SOTP and a breakup could unlock some equity value, but they underestimated how severe the entanglement is across Intel entities, not just wrt shared back-office functions but actual operational entanglement across the organization (hot lot wafers, shared engineers, etc.) that makes a breakup insanely hairy. Not to mention the design business and the foundry business are pretty shitty businesses on a standalone basis with some cultural rot that will take decades to root out. Also as the above poster indicated, all the good engineers have left for greener pastures.
Very sad outcome for America and for Intel shareholders. Andy Grove would be rolling in his grave
Why you guys helping him answer his case study question
Because they aren't like you
lol you think using wso to get spoon fed for a case study in recruiting is cool? You’re probably a loser who cheated his way to getting a job.
Nothing. Intel's a dead man walking. Better to spend time elsewhere. The best chip companies in the world exist because of how incompetent they are and they're just so far behind + it's so capital intensive there's just nothing for them to do but try to stay afloat.
You could make the argument that there is value in Intel's optical networking/photonics businesseses, plus potentially monetizing the Mobileye stake and spinning off the foundry business into a pure-play where they can better-align the compensation and incentive structure to try and bring the talent back. The end state would be independent Mobileye, independent integrated networking player + fabless compute, and third-party pure-play foundry in a better position to attract 3rd party volumes. This would be a really difficult journey, though.
Intel needs to become a national champion and seek gov funds to help underwrite/coinvest in building out its fabs. IDM 2.0 can work but only if they're able to reach it in time. Leading edge is big enough for 2-3 players, but Intel needs significant capital to retain talent and build out fabs.
Above posters mostly captured it all
For some additional color on TSMCs rise to dominance and how things work on the fab side, dylan patel from semi-analysis is a wealth of knowledge. Foundry is a complex beast of a business, and the technological know how involved is nothing short of mind-blowing. INTC is in an extremely difficult position and this isn't a simple fix with cost cutting + a fancy slide deck showing value creation.
There are few people in the world capable of doing the leading node development, and from there it takes a culture that would be very difficult to instill in the USA it sounds like. Also worth listening to the Lex Friedman podcast with dylan more recently.
https://www.dwarkeshpatel.com/p/dylan-jon
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