- Chipmaker wants to slash costs and simplify the business
- Strategic shift comes after controversial departure of CEO
- Stock has lost 70% of its value since February 2021
Chip firm Intel (INTC:NASDAQ) is to spin-off its venture capital arm Intel Capital as the company grapples to re-establish its place at the top of the semiconductor table.
This is a strategic move aimed at reducing costs and streamlining operations, a response to intense competition and a challenging market landscape. The spin-off is expected to be completed in the second half of 2025, with Intel remaining an anchor investor.
Intel Capital, established in 1991, has been a crucial component of Intel’s ecosystem, investing in strategic companies across various sectors, such as silicon, 5G, devices, and cloud. With over $5 billion in assets under management, the fund has invested in more than 1,800 companies worldwide, deploying over $20 billion in cash.
Some of its notable portfolio companies include AI chip startup SambaNova, Israeli AI company AI21 Labs, humanoid robotics firm Figure, and AI developer platform Anyscale.
UPHEAVAL AT INTEL
This move supports Intel’s broader strategy to maximize the value of its assets and drive greater focus and efficiency across the business. In December 2024, CEO Pat Gelsinger controversially left the company after a four-year stint in the top job, a spell that saw Intel fall behind as the AI shift emerged, swiping billions of dollars off the company’s market valuation.
Intel’s share price has fallen from around $68 to $19.20 since Gelsinger’s appointment in February 2021.
Intel has appointed David Zinsner and Michelle Johnston Holthaus as interim co-CEOs, replacing Pat Gelsinger. Holthaus is also CEO of Intel Products, a recently created division spanning the chipmaker’s consumer-focused operations as well as its data centre, AI, network, and edge businesses. The change in leadership signals a shift in Intel’s strategy, focusing on cost-cutting and streamlining operations to improve long-term competitiveness.
AXES WILL FALL AT INTEL
Intel’s cost-cutting measures, including the spin-off of Intel Capital, aim to realign its cost structure with its new operating model and address the fact that its revenues have not grown as expected. By reducing its headcount by approximately 15,000 roles (15% of its workforce), Intel plans to deliver $10 billion in cost savings by 2025.
This action is part of the company’s plan to simplify its portfolio, eliminate complexity, reduce capital and other costs, and suspend its stock dividend to prioritise investments in the business. Intel hopes that its shift in focus will improve its long-term competitiveness by making the company a leaner, more agile, and better-positioned company to capitalise on future technological trends.
Issue Date: 15 Jan 2025
