Intel is under pressure from investors to consider a new strategy. According to a letter from hedge fund Third Point seen by Reuters, the options include divesting some of its previous acquisitions and splitting its manufacturing business from the chip design activities. Intel said it welcomes input from all investors and looked forward to engaging with Third Point on the proposals.
Third Point has amassed a nearly USD 1 billion stake in Intel, people familiar with the matter told Reuters. News of the letter sent to Intel's chairman sent the company's stock over 6 percent higher, giving Intel a market value of more than USD 200 billion. The stock is down around 21 percent this year, compared with a 43 percent rise in the Nasdaq.
Intel’s most urgent task was addressing its "human capital management issue," as many of its talented chip designers have left the company, "demoralized by the status quo", Third Point CEO Daniel Loeb wrote in the letter. He warned that "without immediate change", the company is putting the US's supplies of leading-edge semiconductors at risk, pushing it towards risky Asian suppliers for key components of PCs, data centres and other critical infrastructure.
Loeb asked Intel to retain an investment adviser to evaluate strategic alternatives, including whether it should remain an integrated device manufacturer and the potential divestment of failed acquisitions, according to the letter. Third Point believes that Intel should consider separating its chip design from its semiconductor manufacturing operations, according to the sources. This could include setting up a joint venture in manufacturing.
Intel customers, such as Apple, Microsoft and Amazon, are developing their own in-house silicon and sending those designs to be manufactured in East Asia. Loeb suggested Intel must offer new solutions to retain these customers rather than have them send their manufacturing away.
If Intel does not take the suggestions on board, Third Point said it would consider proposing alternative directors to Intel's board at the next annual shareholders meeting.
