Intel Corp., a leading semiconductor manufacturer, has embarked on a mission to provide investors with a deeper understanding of its intricate business operations. This endeavor includes hosting a webinar on Tuesday dedicated to discussing its newly revamped segment reporting, with a particular emphasis on its Intel Foundry business. The objective of this event is to articulate the strategic vision and financial framework underpinning Intel’s transition to an internal foundry model, offering stakeholders a more transparent breakdown of its design and manufacturing enterprises.
The decision to resegment Intel’s business structure is anticipated to serve as a catalyst in the short term, illuminating the financial robustness of its design arm while highlighting potential challenges within its manufacturing operations. Analyst Vivek Arya of BofA Securities foresees the design business boasting impressive gross margins exceeding 50% and operating margins surpassing 30%. However, initial projections suggest that the manufacturing arm may grapple with substantial losses. Arya’s projections hint at the design business contributing nearly $2.80 in earnings per share by the following calendar year, juxtaposed with a potential loss of over $1 per share incurred by the manufacturing business.
In line with its commitment to innovation, Intel is not solely focused on internal chip production but is also actively expanding its foundry business to cater to the semiconductor needs of other companies. Despite these forward-thinking initiatives, Arya maintains a neutral stance on Intel shares, citing stiff competition from industry giants like Advanced Micro Devices Inc., Nvidia Corp., and Taiwan Semiconductor Manufacturing Co., compounded by Intel’s resource and scale constraints.
Echoing similar sentiments, UBS analyst Timothy Arcuri maintains a neutral outlook on Intel, acknowledging the potential revenue and margin growth of the Intel Foundry business while expressing reservations about the company’s competitive positioning in key growth segments such as artificial intelligence.
Joseph Moore of Morgan Stanley observes that Intel is strategically segregating its foundry business from its chip operations, potentially prompting investors to evaluate Intel’s valuation more holistically. However, he cautions that investor feedback regarding this initiative remains mixed. Moore underscores that Intel’s narrative hinges on its progress with turnaround efforts, particularly in maintaining process-technology leadership. Consequently, he maintains an equal-weight rating on the stock.
Overall, Intel’s forthcoming webinar is poised to offer invaluable insights into its evolving business structure and future growth prospects. However, prevailing investor sentiment remains nuanced, contingent upon further developments in Intel’s strategic realignment and its ability to navigate competitive dynamics within the semiconductor landscape.