Exclusive-Intel CEO will put the board on plans to shed assets, cut costs, said a source By Reuters

By Max A. Cherney and Milana Vinn

(Reuters) – Intel (NASDAQ: ) CEO Pat Gelsinger and key executives are expected to present a plan later this month to the company's board of directors to shed redundant businesses and overhaul capital spending, according to a source familiar with the matter, as they try to revive its fortunes. of the once powerful manufacturer.

The plan will include ideas on how to shave overall costs by selling businesses, including its Altera programmable chip unit, that Intel can no longer afford with the company's once-huge profits.

Gelsinger and other top executives at Intel are expected to present the plan at a board meeting in mid-September, the same source said.

Details of Gelsinger's proposal were reported here for the first time.

Intel declined to comment.

The proposal does not include plans to split Intel and sell it to a buyer such as Taiwan Semiconductor Manufacturing Co., according to the source and another person familiar with the matter.

The launch, including plans for its production run, has not been finalized and may change before the meeting.

Intel has already spun off its design business, and has been reporting its financial results separately since the first calendar quarter of this year.

The company has erected a wall between the design and manufacturing businesses to ensure that potential customers in the design phase will not have access to the technical secrets of customers who use Intel's factories, known as fabs, to make their chips.

Intel is suffering one of its worst moments as it tries to play catchup in the AI ​​era against the likes of Nvidia (NASDAQ:), the dominant AI chip maker with a market capitalization of $3 trillion. In contrast, Intel has now sunk below $100 billion after a bad second-quarter report in August.

The proposal to be presented by Gelsinger and others is likely to include plans to further reduce the amount of money the company spends on expanding the plant. The move could include plans to temporarily or completely stop its $32 billion factory in Germany, a project that has reportedly been delayed, the source said.

In August, Intel said it expects to cut capital spending to $21.5 billion by 2025, down 17% from this year, and issued a weaker-than-expected third-quarter forecast.

In addition to the CEO and executive plans, Intel has retained Morgan Stanley and Goldman Sachs to advise the board on which businesses Intel can sell and what it needs to keep, according to two sources with knowledge of the company's advisory plans.

Intel has not yet solicited bids for the product units, but will do so once the board approves the plan, according to two sources familiar with the company's advisory plans.

ALTERA SPIN OUT

The mid-September board meeting is crucial for the one-time pub king. Intel reported a disastrous second quarter in August, which included a temporary suspension of the company's dividend payments and a 15% workforce reduction, aimed at saving $10 billion.

Weeks later, chip industry veteran Lip-Bu Tan resigned from the board after months of debate over the company's future, Reuters reported, leaving a vacancy for an experienced semiconductor business on the board.

Last Thursday, after the Reuters report, Gelsinger sought to reassure investors about the company's weak performance.

“It's been a tough couple of weeks,” Gelsinger said at the Deutsche Bank conference. “And we've been working hard to fix the problems.”

Gelsinger said the company is “taking seriously” what investors are saying and that Intel is focusing on the second phase of the company's turnaround plan.

Part of those plans will remain unresolved until the mid-September meeting. After that, the company's directors will likely make important decisions about which businesses Intel will keep and which it will shed.

One unit the company may be looking to spin off is its programmable chip business, Altera, which Intel acquired for $16.7 billion in 2015. Intel has already taken steps to spin it off as a separate but wholly owned division and has said it plans to sell it. part of its stake in an initial public offering in the future, although it has not yet set a date.

But Altera could also be sold outright to another manufacturer interested in expanding its portfolio, and the company has quietly begun exploring the possibility of a sale, according to a source familiar with its advisory plans and one of the sources familiar with the cuts. businesses.

Infrastructure chip maker Marvell (NASDAQ: ) could be one buyer for that deal, according to one of the sources.

Bloomberg previously reported on Intel's various options including the possible separation of Intel's product design and manufacturing businesses that are expected to be discussed at the board meeting.