At any point of the digital transition,…
The Third Point hedge fund, which holds $1 billion in Intel shares, requested that the corporation adjust its strategy to doing business urgently. According to investors, a turnaround can be carried out by the chipmaker, through which the chip production and design units will become separate entities, get rid of “bad” properties and devote more attention to contract manufacturing. Moreover, the matter of frame leakage must be resolved by Intel. The Third Point is planned and ready to “push” their feelings.
Ultimatum of Buyers’
Bloomberg writes that the Third Point hedge fund, which owns a big stake in Intel, invited the American chipmaker to “explore strategic alternatives” which, in particular, include the separation of the company into many separate companies and the selling of some properties. In the absence of any response to the Intel management plan, investors aim to promote their own delegates to the board of directors of the firm.
According to the publication, in a letter to the chairman of the board of directors of Intel, Omar Ishrak, the head of the fund, Dan Loeb, denounced the leadership behavior and the performance that Intel has shown in recent years. According to Loeb, the company has lagged well behind rivals over the past five years in the face of TSMC and Samsung due to delays in the transition to a more advanced technological method in microprocessor development.
In the area of staff relations, the president of the hedge fund did not hesitate to figure out Intel’s issues. He regretted the leakage of skilled professionals “demoralized by the status quo.” Note that in June 2020, the company left Jim Keller, the former chief architect of AMD, with whose direct involvement the Zen processor architecture was developed, due to differences with the management on the outsourcing of chip development.
The letter also notes a drop in Intel’s share of PC processors and data centers in key markets – AMD is taking over the initiative here. According to investors at Third Stage, graphics chip maker Nvidia dominates the AI hardware space, while Intel is barely represented in this promising market.
A spokeswoman for the hedge fund drew Intel executives’ attention to the fact that major clients such as Amazon, Apple and Microsoft were producing their own processors. These businesses depend on Intel’s international competitors’ manufacturing facilities. According to Loeb, by giving them an option, the American chipmaker is obligated to keep these firms among his consumers.
What is given by Third Point
Intel was advised by Loeb to use investment advisory services. This is important, in his view, in order to determine the strategic options of the organization. The firm should, in particular, consider transforming its operations and selling questionable properties, such as the 2015 purchase of FPGA maker Altera.
Furthermore, investors are optimistic that the amount of contract production can be expanded by the firm. This would be helped by the splitting of Intel into separate firms, one of which will be primarily interested in the manufacture of chips, and the other – in their manufacturing. In 2008, AMD did a similar thing, splitting off its production business into a new entity now known as Globalfoundries, one of the biggest semiconductor contract manufacturers in the world.
Reaction from Intel
The chipmaker declared its readiness to explore Third Point ideas in response to an appeal from Third Point. Intel stock rose 6.1 percent after the information about the letter was made public, and the company’s market capitalization hit $ 200 billion. The share value of Intel fell by 21 percent at the end of 2020.
According to Reuters, Third Point owns Intel shares worth approximately $1 billion and, according to Dan Loeb, the fund is prepared to expand its interest in the firm, thus increasing its impact on the growth of the American semiconductor manufacturer.
In particular, Third Point handles 15 billion dollars worth of cash. As the agency reports, the investment firm has a strong track record of “pushing for deals.” The Third Point Offshore fund of the company reported almost 20 percent growth in 2020, according to a knowledgeable source from Reuters.