Lip-Bu Tan did not hold back.
“I know the past few months have not been easy,” the Intel CEO said in a July 24 message to employees. “We are making hard but necessary decisions to streamline the organization, drive greater efficiency and increase accountability at every level of the company.”
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Tan, who was named chief executive in March, said the chipmaker (INTC) plans to reduce headcount about 15% via dismissals and attrition, finishing the year with a global workforce of about 75,000.
“We will become a faster, more agile and more vibrant company,” he said. “We will eliminate bureaucracy and empower engineers to innovate with greater speed and focus.”
Intel CEO Lip-Bu Tan says the company is making hard but necessary decisions.
Intel’s second-quarter results beat Wall Street’s revenue expectations but came up short on earnings.
The Santa Clara, Calif., company’s shares were off 9.3% at last check; they’re down 34% from a year ago.
Intel CEO: Approaching AI Much Differently
“Our goal is to reduce inefficiencies and redundancies,” Tan said during the earnings call.
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He told analysts that Intel wouldn’t move forward with planned projects in Germany and Poland.
The company also intends to consolidate its assembly and test operations in Costa Rica into its larger sites in Vietnam and Malaysia. And it will further slow the pace of construction in Ohio to ensure spending is aligned with market demand.
Turning to artificial intelligence, Tan said that Intel previously had approached AI “with a traditional silicon and training centric mindset, without a cohesive silicon systems software stack and strategy,” he said.
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“We recognize the need to move up the abstraction stack into system and software. This is the area where Intel has traditionally been weak or entirely absent.”
“But we intend to incubate and grow these important skillsets and capabilities under my leadership,” Tan continued. “This will take time, but it will be vital for Intel to stay relevant in the next wave of computing.”
TheStreet Pro’s Guilfoyle: Intel CEO Tan has a chance
TheStreet Pro’s Stephen Guilfoyle offers a terse assessment of Intel’s results.
“Tough quarter,” he said. “Tough few years.”
Guilfoyle, a veteran trader whose career dates back to the floor of the New York Stock Exchange in the 1980s, opines that “Intel has not had a competent CEO since Brian Krzanich resigned in June 2018 after violating the firm’s non-fraternization policy with an employee,” he said, “This new CEO has a chance.”
Related: Intel stock faces a chipmaking Catch-22, top analyst warns investors
“At least he understands that Intel is no longer considered an elite American tech firm and that to be competitive a lot of work has to be done,” Guilfoyle added. “He has no delusions.”
Tan has to improve cash flows and the balance sheet and compete against the likes of Nvidia (NVDA) and Advanced Micro Devices (AMD) , “two chip designers at the top of the industry with an incredible level of corporate leadership stemming from their respective C-suites,” he said.
Intel’s CEO “also seems to understand that the foundry business may grow but is not competitive against Taiwan Semiconductor (TSM) and is not close to turning a profit,” he noted.
Guilfoyle, known on Wall Street as Sarge, said the opportunity to make money on the short side has passed.
“I don’t see any catalyst that would prompt me to invest in Intel any time soon,” he said. “The other semis are still better plays. … I don’t even see viable options-related plays here. There’s just not enough premium to be paid for taking on the risk over time.”
“Kind of reminds me of an old Motley Crue song… ‘Don’t Go Away Mad (Just Go Away).'”
Judge Dismisses Suit Against Intel; JPM Lifts Target
Separately, a federal judge dismissed a lawsuit claiming Intel defrauded shareholders by concealing its business problems, leading to a $32 billion one-day tumble in its market value, Reuters reported.
U.S. District Judge Trina Thompson in San Francisco said that while she “understands plaintiffs’ frustrations,” the company did not wait too long to reveal a $7 billion operating loss in its foundry business,
Intel’s stock price sank 26% on Aug. 2, 2024, a day after the chipmaker unveiled more than 15,000 job cuts and suspended its dividend, hoping to save $10 billion in 2025.
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After the Q2 earnings report, JP Morgan raised its price target on Intel to $21 from $20 and affirmed an underweight rating on the shares, according to The Fly.
The investment firm sees both continued demand and competitive headwinds for Intel. While the company decides whether to go fabless, its turnaround remains slow and customers buying before tariffs kick in creates risk to second-half 2025 estimates, it said..
Fabless refers to companies that design and market chips but outsource manufacturing to specialized foundries.
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