Intel’s shares surged by 8% in after-hours trading on Monday following the company’s announcement to restructure its foundry division into an independent unit, complete with its own board and the capability to seek external funding.
As part of CEO Pat Gelsinger’s broader strategy to revitalize the company, Intel conveyed in an employee memo that it would also divest a portion of its stake in Altera. Gelsinger emphasized that this restructuring aims to empower the foundry division to explore independent funding opportunities. This move follows a recent board meeting focused on the company’s strategic direction.
The foundry business, designed to manufacture chips for external clients, has significantly burdened Intel’s finances, with an expenditure of approximately $25 billion over the past two years. In addition to evaluating outside funding, Intel is contemplating spinning off the foundry into a publicly traded entity, according to a source familiar with the situation who requested anonymity due to the sensitive nature of the discussions.
Establishing a comprehensive operating board and simplifying the corporate structure would facilitate the separation process, making it more manageable than transforming a fully integrated unit into a standalone company.
Before the rise in stock value post-market, Intel had experienced a nearly 60% decline in valuation this year. The company has faced market share losses in its primary PC and data center sectors while competitors like Nvidia excelled in the artificial intelligence chip market. In August, Intel disclosed disappointing quarterly earnings, leading to its most significant stock sell-off in five decades, and announced plans to cut over 15% of its workforce as part of a $10 billion cost-cutting initiative. Gelsinger noted that the company is currently about halfway through the layoff process.