Intel (INTC) is currently working closely with investment bankers to explore strategic options, according to an exclusive report by Bloomberg. This comes as the chip giant faces one of the most challenging periods in its 56-year history. Among the scenarios being considered is a potential split of its product design and manufacturing businesses. Certain factory projects might also be scrapped.
Morgan Stanley and Goldman Sachs, Intel’s longtime financial advisors, have been providing guidance on the company’s options, which include potential mergers and acquisitions. The urgency of these discussions has intensified following Intel’s disappointing second-quarter earnings that sent its shares plummeting to their lowest level since 2013.
According to the report, the various options being considered by Intel are expected to be presented at a board meeting in September. A potential separation or sale of Intel’s foundry division, which is focused on manufacturing chips for external customers, would mark a significant shift in strategy for the company’s CEO, Pat Gelsinger. Gelsinger has long seen the foundry business as crucial to restoring Intel’s leadership in the semiconductor industry.
Intel May Opt for Less Drastic Measures
However, it’s more likely that Intel will opt for less drastic measures before resorting to such a significant move. The company may instead choose to delay some of its expansion plans, a strategy it has already begun to implement through project financing deals.
The company has been forced to scale back after announcing plans to cut around 15,000 jobs. Moreover, it significantly reduced its capital expenditure and suspended its dividend.
Furthermore, the financial outlook for Intel’s foundry business remains challenging, particularly as it struggles to attract more external customers. In fact, this segment reported operating losses of $2.8 billion in its most recent quarter.
What Is the Target Price of Intel?
Analysts remain sidelined about INTC stock, with a Hold consensus rating based on one Buy, 26 Holds, and five Sells. Over the past year, INTC has declined by more than 35%, and the average INTC price target of $27.32 implies an upside potential of 35.7% from current levels.
