Why Intel could be worth more than $200 billion if it breaks up

Yahoo

18-02-2025

The rumor mill is spinning overtime on struggling Intel (INTC) as the tech icon looks at ways to create shareholder value.
Chip rivals Taiwan Semiconductor (TSM) and Broadcom (AVGO) are each eying deals with Intel that could break up the company, the WSJ reported over the weekend.
Broadcom is reportedly looking to gain control of Intel's lucrative chip design and marketing business. Taiwan Semiconductor is reportedly studying controlling some or all of Intel's chipmaking plants.
A spokesperson for Intel didn't immediately return Yahoo Finance's request for comment.
A breakup could extract a good bit of value for long suffering Intel shareholders, estimates Evercore analyst Mark Lipacis.
In an analysis of Intel's business, Lipacis said Intel is conservatively worth $167 billion or $38.24 a share. Intel's stock currently trades at $24.66, down more than 47% over the past year. The stock has crashed 65% in the last five years to a market cap of $102 billion.
Using more robust projections of financial performance for each business, Lipacis estimates Intel could be worth $237 billion or $54.18 a share.
A path to a deal could be tough, says Lipacis.
"Depending on how a deal is structured, it might require regulatory approval from countries around the world, including China. Also, Intel has historically designed its factories to make x86 CPUs, so it is not clear if Intel's factories would be able to make external chips efficiently with its current physical plant. Finally, Intel's foundry business reported a 76% operating loss in 2024, vs Taiwan Semiconductor's 45% operating margin," he explained.
Wall Street analysts at Raymond James, Bank of America, and Bernstein echoed concerns over regulatory hurdles and antitrust issues, with Bank of America's Vivek Arya saying 'any potential INTC split could be time-consuming and complicated.'
Plus, any deal involving TSMC and Intel's manufacturing business would face tight constraints given the rules of Intel's CHIPS Act funding, which requires Intel to retain ownership of more than 50% of its foundry, Arya wrote in a note to investors Tuesday morning.
The Trump administration 'could be wary of a foreign entity completely taking over an iconic US-firm that has deep involvement with US Department of Defense customers,' Arya wrote.
Raymond James analyst Srini Pajjuri said in a note that '[A] better outcome for [the] U.S. government would be to work with TSM separately to expand its U.S. manufacturing footprint.'
Intel was awarded $3 billion in US government funding in September to manufacture chips for the military.
Bernstein analyst Stacy Rasgon said Broadcom would be a good candidate to take over Intel's products business. "Hock [Tan] has shown the ability to take a hatchet to costs, ruthlessly, while still preserving innovation,' Rasgon wrote of Broadcom's CEO in a note Tuesday morning.
Intel has endured a challenging few months. The tech icon parted ways with embattled CEO Pat Gelsinger on Dec. 1.
Gelsinger led aggressive efforts to turn around the troubled US chipmaker for more than three years. He slashed thousands of jobs, improved costs, secured CHIPS Act funding, built chip foundries, and promised fast AI chips that could compete with Nvidia (NVDA) and AMD (AMD).
Intel named CFO David Zinsner and former head of client computing Michelle Johnston Holthaus as the interim co-CEOs. Holthaus was also named Intel Products CEO.
Intel will likely fill the CEO role by bringing in a top name from outside the company, Wall Street sources have told Yahoo Finance since Gelsinger's departure.
Any permanent CEO will have to repair trust with investors after missing financial targets, and make a decision on the foundry business. It also requires immediately stabilizing the financials.
That's in addition to likely exploring a breakup of the company to drive shareholder value.
Intel's fourth quarter sales fell 7% year over year to $14.3 billion. Net earnings plunged 76%.
The company forecasts it will only break even on the profit line this year.
Whatever happens to Intel, it will be important for the US.
"Well, it'd be great for the United States if their process, technology arm could be a credible alternative to Taiwan Semiconductor and Samsung. They're trying to do that, but that takes time and a lot of capital so that is a very, very hard thing," Microsoft (MSFT) co-founder Bill Gates told me on Yahoo Finance's Opening Bid podcast (video above; listen in below).
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Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email [e-mail].