Intel Corp's (NASDAQ:INTC) latest strategic shift put a spotlight on its turnaround efforts this week as the company reversed course on plans for its networking unit and doubled down on integrating the business into its core operations.
Intel on Wednesday said it will keep its networking division in-house, reversing plans to spin it off or sell a stake after concluding the unit is more likely to succeed as part of the company.
The chipmaker said it reviewed multiple options for the Network and Edge Group (NEX), including making it a standalone business, but ultimately decided that tighter integration across Intel's silicon, software, and systems would deliver stronger offerings in artificial intelligence, data center, and edge computing.
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As part of the decision, Intel ended talks with Ericsson (NASDAQ:ERIC), which had been exploring a potential investment in NEX, Bloomberg reported.
Earlier this year, Intel said it planned to separate the unit and was seeking strategic backers.
Intel stock gained over 118% year-to-date. The company beat Wall Street expectations in its third-quarter results, reporting $13.65 billion in revenue and 23 cents in adjusted EPS, both above estimates.
Revenue rose 3% year over year, led by a 5% gain in Client Computing, while Data Center and AI slipped 1%.
CEO Lip-Bu Tan said accelerating AI demand is boosting opportunities across Intel's CPU lineup, Application-Specific Integrated Circuits (ASICs), accelerators, and foundry services, adding that Intel's U.S.-based manufacturing gives it a strong competitive position.
For the fourth quarter, Intel guides revenue to $12.8 billion–$13.8 billion and expects eight cents in adjusted EPS, matching analyst forecasts.
CEO’s Turnaround Strategy
The shift reflects the evolving turnaround led by Tan, who took over in March and has been cutting jobs and offloading operations to stabilize the company.
Intel's financial position also strengthened after an unusual Trump administration–brokered deal in August that gave the U.S. government a 10% stake.
Intel then secured $2 billion from SoftBank (OTC:SFBQF) and $5 billion from Nvidia Corp (NASDAQ:NVDA), helping drive a sharp rally that more than doubled the stock this year.
Partnership with Ericsson
Ericsson previously considered investing to help keep Intel's networking business viable, given its reliance on Intel-designed chips for mobile network equipment.
The two companies deepened their partnership last year when Ericsson said future network infrastructure would run on Intel's next-generation Xeon processors.
Challenges Ahead
Intel has struggled to match the pace of Taiwan Semiconductor Manufacturing Co (NYSE:TSM) and Samsung Electronics Co Ltd (OTC:SSNLF) in recent years.
Former CEO Pat Gelsinger was forced out after his costly foundry expansion plan failed to deliver quick returns, prompting Intel to cut costs and consider selling non-core assets.
Price Action: INTC stock is down 0.65% at $43.48 premarket at last check on Thursday.
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