This is also expected to result in third-quarter revenue below market estimates, as it faces spending cuts on traditional data center processors and a focus on artificial intelligence (AI) chips, an area where it has lagged behind competitors.
Shares of Santa Clara, California-based Intel fell 20% in after-hours trading, wiping more than $24 billion off the company’s market value. Shares fell 7% on Thursday, joining a broader decline in U.S. chip stocks after a cautious outlook from Arm Holdings on Wednesday.
The results had little impact on the chip industry. Nvidia (NVDA.O), an AI powerhouse, and smaller rival AMD (AMD.O) rose in after-hours trading, showing they were well positioned to capitalize on the AI boom, to Intel's disadvantage.
"We need fewer people in our headquarters and more people to support our customers," CEO Pat Gelsinger told Reuters in an interview about the layoffs. "Our goal is to pay a competitive dividend over time, but right now we're focused on our balance sheet and reducing debt," he said of the dividend suspension.
Intel, which had 116,500 employees as of June 29, excluding some subsidiaries, said the majority of the cuts would be completed by the end of 2024. In April, the company announced a quarterly dividend of 12.5 cents per share.
Intel is in the midst of a restructuring plan that focuses on developing advanced AI processors and expanding into a manufacturing services provider for other companies, aiming to regain the technological edge it lost to Taiwan's TSMC, the world's largest contract chipmaker.
The push to boost its outsourced manufacturing business under Gelsinger has increased Intel’s costs and pressured its profit margins, and the chipmaker recently announced it would cut costs.
Intel announced on Thursday that it will cut operating costs and reduce capital spending by more than $10 billion by 2025, more than it originally planned.
“The $10 billion cost reduction program shows that management is willing to take bold and aggressive steps to restore momentum and address issues,” said Michael Schulman, chief investment officer at Running Point Capital. “However, we all wonder, ‘Is this enough?’ and is this a little too late given that CEO Gelsinger has been at the helm for more than three years?”
As of June 29, the company had cash and cash equivalents of $11.29 billion and total short-term debt of about $32 billion.
Intel's lagging position in the AI chip market has sent the company's stock down more than 40% year-to-date.
Intel's third-quarter revenue forecast was between $12.5 billion and $13.5 billion, compared with analysts' average estimate of $14.35 billion, according to LSEG data. The company also forecast an adjusted gross profit margin of 38%, well below market expectations of 45.7%.
CUTTING CAPITAL SPENDING:
1. Time to revamp the foundry : Analysts believe that Intel's foundry overhaul will take years to materialize and predict that TSMC will maintain its advantage in the coming years, even as Intel ramps up production of AI chips for personal computers. This shows that Intel is working to improve its competitiveness in the chip manufacturing sector, but it will take time to see clear results.
2. Performance of AI PC chips : Although Intel's AI processors for PCs are selling better than expected, high manufacturing costs are reducing the profitability of these products. This indicates that developing new technology may not immediately bring financial benefits due to high investment costs and unsatisfactory performance.
3. Decline in data center segment : Intel's data center segment declined 3% in the quarter, indicating that despite strong demand for AI infrastructure, the majority of investments are still in non-Intel GPUs, such as those from Nvidia. This suggests that Intel is struggling to compete with other GPU vendors in the data center market.
4. Impact of export license revocation : The revocation of export licenses in May affected Intel's revenue in China in the second quarter. This indicates that political and trade issues may have a negative impact on Intel's business in international markets.
5. Capital expenditure (CAPEX) cuts : Intel plans to cut capital expenditures by 17% in 2025 from the previous year, down to $21.5 billion. This shows that Intel is adjusting its investment strategy to save costs and focus on higher-margin areas. These costs are expected to stabilize in 2024, showing that the company is looking to control costs and optimize investments.
Overall, Intel is taking many measures to reform and improve its financial performance, but still faces many challenges in competing and adjusting investment strategies to suit the rapidly changing business environment.
Nguyen Quang Minh (According to Reuters)
Source: https://www.nguoiduatin.vn/intel-cat-giam-15-nhan-su-tam-ngung-chi-tra-co-tuc-gia-co-phieu-giam-manh-204240802154558858.htm
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