As the chip giant struggles to recover from a challenging second quarter while reorganizing the business for the future, CEO Pat Gelsinger of Intel (NASDAQ:INTC) has challenged his staff to find fresh cost savings.
On Friday, Gelsinger told Yahoo Finance that this was a time for a bit of austerity. He added that they had stuff they created over the last decade that needed to be cleaned up, and it helps drive a more accelerated pace to the transformation they have underway.
On the company’s conference call for the second quarter last week, Gelsinger informed investors that since taking over as CEO in 2021, he had sold six businesses. The corporation discontinued its drone business more recently.
According to Gelsinger, the combined proceeds from these six exits have given Intel (NASDAQ:INTC) $1.5 billion to use elsewhere in its company. Additionally, the company is still on schedule to spin off its self-driving technology unit, Mobileye, later this year. This step should free up more funds.
These company closures occur at a crucial time for Intel (NASDAQ:INTC) as it aggressively invests in new chips and its nascent foundry business to reclaim market dominance from rivals like AMD (NASDAQ:AMD). Additionally, they come at a time when Intel’s problems grew worse in the second quarter due to product delays and waning PC demand from consumers.
Gelsinger stated on Yahoo Finance Live last week that the industry was “at the bottom” but that trends would continue to improve as product delays decreased and seasonal influences increased demand.
Deutsche Bank analyst Ross Seymore wrote in a note to clients saying, looking forward, they believe Intel’s weak report will likely further solidify the company as a ‘show me story’ until progress on manufacturing technology, product competitiveness, and financial returns become more apparent to investors. He mentioned that in their opinion, the first instance for Intel (NASDAQ:INTC) to rebuild credibility in its strategy would likely come in 4Q22, as the company’s updated guidance implies a sizable ramp in revenue and margins that are likely to be viewed as optimistic until delivered.
Seymore kept the Hold rating on Intel’s stock but lowered the price target from $45 to $38.
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