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OFFON

INTEL CORPORATION

(INTC)
  Report
Real-time Estimate Quote. Real-time Estimate Cboe BZX - 08/02 07:36:11 am
53.875 USD   +0.29%
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Third Point Calls on Intel to Explore Strategic Alternatives -- 3rd Update

12/29/2020 | 05:37pm EDT

By Asa Fitch

Activist hedge fund Third Point LLC pressed Intel Corp. to make sweeping strategic changes after a year in which the U.S. semiconductor giant suffered more product delays and lost its rank as America's highest-valued chip company.

In a letter Tuesday to Intel Chairman Omar Ishrak, Third Point Chief Executive Daniel Loeb said Intel's woes could threaten the U.S. tech industry and urged the chip maker to consider alternatives, including selling some of its acquisitions and splitting its design and manufacturing operations -- a move that would end Intel's long-held status as America's leading integrated semiconductor maker.

Intel said it "welcomes input from all investors regarding enhanced shareholder value. In that spirit, we look forward to engaging with Third Point LLC on their ideas towards that goal."

Third Point's demands follow years of engineering struggles at Intel and growing competitive pressure from rivals that outsource their chip manufacturing to factories in Asia -- including Nvidia Corp., which surpassed Intel in market capitalization in 2020. Intel this year pushed back production of its most advanced chips, was dumped by Apple Inc. as the supplier for its Mac computer processors and lost market share to former distant rival Advanced Micro Devices Inc.

"Without immediate change at Intel, we fear that America's access to leading-edge semiconductor supply will erode, forcing the U.S. to rely more heavily on a geopolitically unstable East Asia to power everything from PCs to data centers to critical infrastructure and more," Mr. Loeb wrote in Third Point's letter.

Mr. Loeb also said Intel should address the recent departures of top chip designers and what he called an "increasingly demoralized" remaining engineering staff. The letter was reported earlier by Reuters.

Intel shares closed up 5% after Third Point's letter.

The chip maker said this year that it would consider outsourcing the manufacturing of some of its most advanced chips. The company is expected to decide next month where it will make future generations of processors.

Intel has fallen behind Taiwan Semiconductor Manufacturing Co. and South Korea's Samsung Electronics Co. in the race to make the most cutting-edge chips. TSMC makes chips under contract for some Intel competitors, including Nvidia and AMD.

As TSMC and Samsung gradually shrunk their transistors in recent years, leading to higher-performance chips, Intel's strategy to aggressively downsize its circuitry stumbled. In July, Intel said it encountered new delays in developing its latest chip technology, which it said was roughly a year behind its initial targets. Soon after, it shook up its engineering team, with chief engineering officer Venkata "Murthy" Renduchintala leaving the company.

AMD's latest generation of central processing units, or CPUs, have eaten away at Intel's market share in PCs and servers that go into big data centers. Nvidia, meanwhile, dominates the burgeoning market for artificial-intelligence processing, where its graphics chips excel.

Third Point said Intel also faces competitive threats from the growth of custom chip-making by big tech companies like Apple, Microsoft Corp. and Amazon.com Inc. Apple this year opted to use in-house chips for some of its latest Mac computers, dropping Intel as a supplier.

"You must be able to offer new independent solutions to retain those customers rather than have them send their manufacturing away," Third Point's letter says.

Intel shares are down more than 17% this year. Nvidia's stock has more than doubled and AMD's shares are up almost as much.

Nvidia and AMD are using some of that investor enthusiasm to pressure Intel further. Nvidia has agreed to buy mobile-phone chip design giant Arm Holdings in a $40 billion deal that would be the largest ever in the chip business. AMD said it would use stock to buy chip maker Xilinx Inc. in a $35 billion deal.

Third Point said in its letter that Intel's board allowed management to "fritter away" the company's advantages while paying executives lavishly even as Intel lost more than $60 billion of market capitalization this year.

"Stakeholders will no longer tolerate such apparent abdications of duty, " it said, pointing to the company's loss of chip-design talent as a top concern.

Stacy Rasgon, an analyst at Bernstein Research, said Intel was likely already considering the restructuring ideas Third Point proposed. He said it wasn't clear how separating the company's chip-making operations from its chip-design unit would add value for investors. "It doesn't fix the manufacturing problem, which is the root of everything that's going on," he said.

Third Point recently acquired a stake in Intel worth roughly $1 billion, according to a spokeswoman for the hedge fund. The investor said it would submit nominees for election to Intel's board at the company's annual meeting next year if Intel were reluctant to address its concerns, the letter said.

With its large size and growing revenues, Intel hasn't faced major activist-investor pressure in recent years, even as some of its peers stared down calls for change. Smartphone-chip giant Qualcomm Inc. came under pressure from activist investor Jana Partners LLC in 2015, which advocated breaking up the company's chip-design unit from its patent-licensing division. The company decided against a split, and Jana withdrew.

Despite its woes, Intel has said it expects to post record sales this year, boosted by pandemic-era demand for PCs and cloud computing.

Write to Asa Fitch at asa.fitch@wsj.com

(END) Dow Jones Newswires

12-29-20 1736ET

Stocks mentioned in the article
ChangeLast1st jan.
ADVANCED MICRO DEVICES, INC. 3.15% 106.19 Delayed Quote.15.79%
APPLE INC. 0.15% 145.86 Delayed Quote.9.93%
INTEL CORPORATION 0.04% 53.72 Delayed Quote.7.83%
MEDTRONIC PLC 0.48% 131.31 Delayed Quote.12.10%
MICROSOFT CORPORATION -0.56% 284.91 Delayed Quote.28.10%
MSCI TAIWAN (STRD) -0.74% 690.203 Real-time Quote.15.72%
NVIDIA CORPORATION -0.83% 194.99 Delayed Quote.49.36%
QUALCOMM, INC. -0.79% 149.8 Delayed Quote.-1.67%
SAMSUNG ELECTRONICS CO., LTD. -0.63% 78500 End-of-day quote.-3.09%
TAIWAN SEMICONDUCTOR CO., LTD. 1.13% 80.3 End-of-day quote.29.10%
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED -0.51% 580 End-of-day quote.9.43%
XILINX, INC. 1.76% 149.84 Delayed Quote.5.69%
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Financials (USD)
Sales 2021 73 743 M - -
Net income 2021 16 856 M - -
Net Debt 2021 11 352 M - -
P/E ratio 2021 13,1x
Yield 2021 2,58%
Capitalization 218 B 218 B -
EV / Sales 2021 3,11x
EV / Sales 2022 3,12x
Nbr of Employees 110 600
Free-Float 99,9%
Chart INTEL CORPORATION
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Intel Corporation Technical Analysis Chart | MarketScreener
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Technical analysis trends INTEL CORPORATION
Short TermMid-TermLong Term
TrendsBearishBearishNeutral
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus HOLD
Number of Analysts 48
Last Close Price 53,72 $
Average target price 63,03 $
Spread / Average Target 17,3%
EPS Revisions
Managers and Directors
Patrick P. Gelsinger Chief Executive Officer & Director
George S. Davis Chief Financial Officer & Executive Vice President
Omar S. Ishrak Independent Chairman
Daniel J. McKeon Vice President-Information Technology Group
Ann B. Kelleher Senior Vice President & GM-Technology Development
Sector and Competitors
1st jan.Capi. (M$)
INTEL CORPORATION7.83%217 942
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED9.43%538 129
NVIDIA CORPORATION49.36%485 915
BROADCOM INC.10.86%199 140
TEXAS INSTRUMENTS16.14%175 982
QUALCOMM, INC.-1.67%168 974