Chip stock Intel (INTC) has had a rocky path lately, but there are some signs pointing to improvement. From a three-day board summit, a plan to spin off Intel’s foundry operations into their own subsidiary was revealed. That move has resonated with shareholders, and Intel shares were up fractionally in Wednesday’s trading after a big jump on Tuesday September 17th.
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The move to spin off Intel’s foundry operations into their own subsidiary, dubbed Intel Foundry Services, is being done to accomplish three of Intel’s main goals: focus on its x86 processor lineup, improve its foundry presence, and cut costs.
Intel noted that the move to break off the foundry into its own operations will be part of a larger initiative that sees Intel out to save $10 billion in costs. It will also give Intel Foundry Services a better measure of financial transparency. One thing that did not change, however, was the leadership: Intel is apparently leaving its team in place, with the executive branch reporting directly to CEO Pat Gelsinger. There would, however, be a separate board established later.
Germany Takes it on The Chin From Intel
There is, however, some unexpected fallout from Intel’s moves to cut costs, and perhaps the biggest among them is Germany. The German government recently received the bad word that Intel was delaying, by at least two years, its plans to set up two chip factories in Germany.
The move was expected to create 3,000 jobs, give or take, and would have included a little over $10 billion in state aid. The move was seen as a good way to reduce Germany’s dependence on Asian chip suppliers, but with Intel now cutting costs at a frantic pace, it is natural to wonder if Intel will ever come back to Germany. A report from DW noted that there was about a 50% chance that Intel would end up abandoning its plans altogether which would be a blow to the region’s economic outlook.
Is Intel a Buy, Sell or Hold?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on one Buy, 26 Holds and six Sells assigned in the past three months, as indicated by the graphic below. After a 39.84% fall in its share price over the past year, the average INTC price target of $26.09 per share implies almost 30% upside potential.
