Intel Corporation is set to undertake a significant strategic overhaul under the leadership of CEO Pat Gelsinger. In a pivotal move aimed at revitalizing the company, Gelsinger and other key executives are preparing to present a comprehensive plan to the board of directors later this month. This plan is anticipated to address cost reductions, business divestitures, and adjustments in capital expenditure to help restore Intel’s standing in the semiconductor industry.

Proposed Strategic Changes:

According to sources familiar with the matter, the forthcoming proposal will outline several key components:

Business Divestitures: A primary focus of the plan will be the sale of certain non-core businesses. This includes the programmable chip unit Altera, which Intel acquired for $16.7 billion in 2015. Altera is currently being considered for a full sale, though it might also be partially spun off in an initial public offering (IPO) in the future. Potential buyers for Altera include infrastructure chipmaker Marvell, among others interested in expanding their portfolio.

Capital Spending Cuts: Intel is likely to propose significant reductions in capital expenditure, potentially halting or pausing major projects such as the $32 billion factory in Germany. The company has already announced a planned reduction in capital spending to $21.5 billion in 2025, down 17% from the current year.

Current Financial and Strategic Landscape:

Intel is navigating a challenging period, struggling to keep pace with competitors like Nvidia, which dominates the AI chip market with a market capitalization of $3 trillion. Intel’s market value has dropped below $100 billion, following a disappointing second-quarter earnings report that led to a pause in dividend payments and a 15% staff reduction, aimed at saving $10 billion.

The company’s strategy to separate its foundry business from its design division has been a key step in addressing these challenges. This separation is intended to protect the technology secrets of clients using Intel’s manufacturing facilities while allowing the design business to operate independently.

Advisory and Future Outlook:

Intel has engaged Morgan Stanley and Goldman Sachs to advise the board on potential business sales and restructuring options. This advisory support will play a crucial role in shaping the company's future direction, including decisions about which business units to retain and which to sell.

Despite these efforts, significant portions of the strategic plan remain unresolved. The upcoming mid-September board meeting will be critical for finalizing these plans and determining the future course of the company. Gelsinger has acknowledged the difficulties faced by Intel and emphasized the company’s commitment to addressing investor concerns and advancing its turnaround strategy.

Conclusion:

Intel’s proposed strategic revamp marks a significant shift in the company's approach to managing its business and financial health. With plans to reduce costs, divest non-core assets, and adjust capital spending, the company aims to stabilize its operations and regain its competitive edge in the rapidly evolving semiconductor industry. As Intel prepares to present its plan, all eyes will be on the board’s decisions and the subsequent impact on the company's future prospects.

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