24/7 Wall St. Insights
- Intel Corp. (NASDAQ: INTC) has hired a premier investment banker to prevent a takeover by activist investors.
- The argument to replace management of the chip manufacturer is strong.
- Also: Discover the next Nvidia.
Intel Corp. (NASDAQ: INTC) has hired a premier investment banker to prevent a takeover of the chip manufacturer. Given its horrible results, particularly against Advanced Micro Devices Inc. (NASDAQ: AMD) and Nvidia Corp. (NASDAQ: NVDA), it should come as no surprise.
A takeover could be good for shareholders who have watched Intel plunge. Management could be replaced with one with a more positive stockholder program.
CNBC reports: “The sources with knowledge of Morgan Stanley’s latest involvement asked not to be named due to confidentiality. Representatives for Intel and Morgan Stanley declined to comment.” This is a normal playbook. Sometimes banks try to load the board with members favorable to management. Others give management extra power over shareholdings to make a takeover much harder.
The Problem With Intel
No matter what course management takes, the argument to replace management is strong. Intel’s shares are down 58% this year, with much of that coming after poor earnings. Over the same time, Nvidia has risen 161%. It is about to announce earnings that are much higher or lower. The price of the other major AI chip company, AMD, is up 5%, compared to an 18% increase in the S&P 500.
Intel, a successful maker of PC and server chips, missed the AI revolution almost completely. In the most recent quarter, revenue fell 1% to $12.8 billion. Net income was a loss of $1.2 billion, compared to a gain of $1.5 billion in the same quarter the year before. Management made huge layoffs in an effort to cut itself to profits.
Intel thinks its future is in foundry services: “Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones. Second-half trends are more challenging than we previously expected, and we are leveraging our new operating model to take decisive actions that will improve operating and capital efficiencies while accelerating our IDM 2.0 transformation,” said Pat Gelsinger, Intel CEO, when quarterly numbers were released. That should not give investors comfort and is a door to activist investors.
Prediction: This Semiconductor Stock Will Be the Best Performer for the Rest of 2024
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
