Intel Breakup Possible After CEO Retirement, Says Bank of America
Key Takeaways:
Intel may split its operations following CEO Pat Gelsinger's unexpected retirement, analysts at Bank of America (BofA) suggested on Monday.
Gelsinger strongly supported keeping Intel’s manufacturing and foundry businesses integrated as part of his turnaround strategy.
A potential breakup could face challenges, including compliance with conditions tied to the $8 billion in CHIPS Act funding announced last week.
Details on the Potential Split
The sudden departure of CEO Pat Gelsinger has reignited speculation about a possible separation of Intel’s (INTC) internal manufacturing division and its contract foundry business, which produces chips for other companies.
Gelsinger, who led Intel’s efforts to retain both segments under one umbrella, was a key proponent of an integrated business model. With his exit, Bank of America analysts believe a split could now gain momentum.
However, hurdles remain. For instance, the recently announced CHIPS Act funding includes a stipulation that Intel must maintain at least a 35% stake in its foundry business, limiting its options for a full divestiture.
"Both businesses are facing distinct strategic, structural, financial, and competitive issues, with no clear solutions in sight," BofA analysts wrote. They reaffirmed an "underperform" rating on Intel shares, maintaining a price target of $21. Shares of Intel closed slightly lower on Monday.
Intel's Financial Struggles and M&A Speculation
Intel’s stock has been under pressure, losing more than half its value since the beginning of the year. Nevertheless, the company has occasionally seen short-term gains due to speculation about potential asset sales, investments, or acquisition offers.
Earlier this year, reports of Intel divesting parts of its business and potential takeover interest briefly buoyed its stock. However, these bright spots have been rare, as Intel continues to grapple with operational challenges across both its manufacturing and foundry divisions.
Outlook
A breakup of Intel’s business units could represent a seismic shift for the company, but such a move will need to navigate regulatory conditions tied to government funding and address deep-rooted financial and competitive challenges.
For now, uncertainty clouds Intel’s future as investors await clarity on its strategic direction following Gelsinger’s exit.
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