Intel shares slide on quarterly loss, foundry business exit risk
(Reuters) -Intel shares fell 5% in premarket trading on Friday after the chipmaker forecast steeper-than-expected quarterly losses and warned of a potential exit from its foundry business despite new CEO Lip-Bu Tan's turnaround plans.
Tan on Thursday hinted at departing from ex-CEO Pat Gelsinger's core strategy, warning that without demand-backed investment, Intel risks exiting the foundry business, jeopardizing $100 billion in assets and increasing its reliance on TSMC.
As part of its foundry business reform, the company may reserve the advanced 18A manufacturing process for its products and proceed with 14A only if a major external partner commits, Tan stated in a post-conference call.
"Intel Foundry is a big story, and currently people are questioning how successful 18A is. A failure in 18A would be a broken story," said Hendi Susanto, portfolio manager at Gabelli Funds.
Intel also halted or scrapped several fab projects in the U.S. and Europe, citing financial discipline.
Once a leader in American chipmaking, Intel has lost ground after years of strategic missteps, lagging far behind rivals Nvidia and Advanced Micro Devices.
The company's stock has gained 12.8% so far this year, while Nvidia and AMD have jumped about 30% and 34%, respectively.
Since taking the helm in March, Tan has divested businesses, laid off employees and redirected resources as part of his strategic reset to revive the embattled chipmaker.
"There are no more blank checks," Tan wrote in a memo to employees on Thursday, announcing further job cuts as Intel aims to reduce its workforce by 22% to 75,000 by year-end.
"I don't think he's scaling back… I think they're maybe redirecting. I would prefer them to build it out, but only if they have customer commitments," said Ryuta Makino, analyst at Gabelli Funds, who's also an Intel shareholder.
Intel trades at a 12-month forward price-to-earnings ratio of 42.55 versus 33.90 for Nvidia and 32.12 for AMD.
(Reporting by Rashika Singh and Arsheeya Bajwa in Bengaluru, Samuel Indyk in London; Editing by Amanda Cooper and Vijay Kishore)
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