Intel CEO to present plans to cut assets and costs to board, source says By Reuters

By Max A. Cherney and Milana Vinn

(Reuters) – Intel (NASDAQ:) CEO Pat Gelsinger and key executives are expected to present a plan later this month to the company's board to eliminate unneeded businesses and revamp capital spending, according to a source familiar with the matter, as they try to revive the fortunes of the once-dominant chipmaker.

The plan will include ideas on how to cut overall costs by selling businesses, including its Altera programmable chip unit, which Intel can no longer fund with the company's once-sizable profits.

Gelsinger and other senior Intel executives are expected to present the plan at a board meeting in mid-September, the source said.

Details of Gelsinger's proposal are reported here for the first time.

Intel declined to comment.

The proposal does not yet include plans to break up Intel and sell its contract manufacturing operation, or foundry, to a buyer such as Taiwan Semiconductor Manufacturing Co., according to the source and another person familiar with the matter.

The presentation, including plans around its manufacturing operations, are not yet finalized and could change before the meeting.

Intel has already separated its foundry business from its design business, and has been reporting its financial results separately since the first calendar quarter of this year.

The company has erected a wall between its design and manufacturing divisions to ensure that potential customers of the design division do not have access to the technological secrets of customers who use Intel's factories, known as fabs, to make their chips.

Intel is having one of its worst moments yet as it tries to catch up in the ai ​​era against the likes of Nvidia (NASDAQ:), the dominant ai chipmaker with a $3 trillion market cap. In contrast, Intel has now sunk below $100 billion following a disastrous second-quarter earnings report in August.

The proposal that Gelsinger and others will submit will likely include plans to further reduce the company’s capital spending on factory expansion. The proposal could include plans to pause or completely stop its $32 billion factory in Germany, a project that has reportedly been delayed, the source said.

In August, Intel said it expects to cut capital spending to $21.5 billion in 2025, down 17% from this year, and issued a weaker-than-expected third-quarter forecast.

In addition to the CEO and executives' plans, Intel has hired Morgan Stanley and Goldman Sachs to advise the board on which businesses Intel can sell and which it needs to keep, according to two sources with knowledge of the company's advisory plans.

Intel has not yet requested bids for units of the product but will likely do so once the board endorses a plan, according to the two sources familiar with the company's advisory plans.

ALTERA SAYS GOODBYE

The mid-September board meeting is crucial for the former chipmaking king. Intel reported a disastrous second quarter in August, which included the company pausing dividend payments and cutting staff by 15% as it sought to save $10 billion.

Weeks later, chip industry veteran Lip-Bu Tan resigned from the board after months of debate over the company's future, Reuters reported, creating a void of deep experience in the semiconductor business on the board.

On Thursday, following the Reuters report, Gelsinger attempted to reassure investors about the company's weak financial performance.

“It’s been a difficult few weeks,” Gelsinger said at a Deutsche Bank conference. “And we’ve been working hard to resolve the issues.”

Gelsinger said the company is “taking seriously” what investors have said and that Intel is focused on the second phase of the company’s turnaround plan.

Some of those plans will remain unresolved until the company's mid-September meeting, when the company's directors are likely to make crucial decisions about which businesses Intel will keep and which it will abandon.

One potential unit the company could consider selling is its programmable chip business, Altera, which Intel acquired for $16.7 billion in 2015. Intel has already taken steps to spin it off as a separate but wholly owned subsidiary and has said it plans to sell a portion of its stake in an initial public offering in the future, though it has not set a date.

But Altera could also be sold in its entirety to another chipmaker interested in growing its portfolio, and the company has quietly begun exploring whether a sale would be possible, according to a source familiar with its advisory plans and one of the sources familiar with the plans to cut businesses.

Infrastructure chipmaker Marvell (NASDAQ:) is a potential buyer for such a transaction, according to one of the sources.

Bloomberg previously reported on several options for Intel, including a possible split of Intel's product design and manufacturing businesses, which is expected to be discussed at the board meeting.