Intel rallies 9% on possible separation from foundary arm

• Intel stock has been lifted as much as 9% on Friday following a Bloomberg article.
• Semiconductor firm is in talks with Wall Street banks to devise new strategy.
• Company could once again spin off its foundry business after recent resurrection.
• INTC stock is now trading at highest level since its earnings collapse on August 2.

 

Intel (INTC), the troubled legacy semiconductor giant, jumped 9% on Friday after the company leaked internal discussions over spinning off its foundry business and refocusing on chip design.

INTC shares moved as high as $22.12, the highest the stock has traded since it came crashing down on August 2 following an earnings release in which Intel lost $1.6 billion.

As the smallest member of the Dow Jones Industrial Average (DJIA), Intel’s rally was unable to sway the index, which sold off 0.2% despite slight gains from the S&P 500 and NASDAQ.

Intel stock news

Bloomberg published a story on Friday that looks to be a planned leak from the C suite. The story says that the half-century-old semiconductor is working with bankers at Goldman Sachs and Morgan Stanley to devise a new strategy.

The discussions appear to be in their early stages, but the idea of once again separating the foundry and design businesses is back on the table. That would be a 180 for CEO Pat Gelsinger, whose primary plan since returning to Intel in 2021 was to compete with Taiwan Semiconductor (TSM) on the production segment of the semi business. 

Thus far, however, Intel remains the biggest customer of its third-party foundry business. With losses exploding, some bankers think it’s time to at least cut back on some of the colossal capex projects. 

Board Director Lip-Bu Tan, who has the most experience with chip production, left Intel’s board last week. However, rumors have emerged that Tan may be leaving the board to advise an outside spin-off committee. TF International Securities analyst Ming-Chi Kuo reported the following on X:

Tweet appeared on X platform on August 30, 2024

If that is, indeed, the case, then the discussions must be further along than first estimated by the Bloomberg article.

Intel cut 15,000 jobs in light of the recent quarter’s results and also suspended its dividend, which it had paid every quarter since 2013. It began paying the current dividend after suspending it in 2003.

Gelsinger did not hold back at an industry conference this week: “We've been working hard to address the issues, and at earnings we were determined to lay out a clear view of where we were, but also some of the next steps we needed to address. And obviously, the market didn't respond positively."

Intel stock chart

Intel stock has spent the past month trading at 2013 levels. This is below the prior pullback from October 2022 through February 2023 when shares dipped to support at $24.90.

The intraday high at $22.12 is a good sign for bulls since it is above the August 2 high of $21.98. This new high could mean that $24.90 is back on the table. Of course, the real target is the $28.89 low from August 1 since traders love to fill gaps, but that level could be a ways off. Gelsinger has much to do.

INTC daily stock chart