What you need to know
- Intel shareholders have filed a lawsuit against the chipmaker claiming that Intel hid negative information about Intel Foundry services.
- Intel reported a $1.6 billion net loss in its most recent quarterly report and announced 15,000 layoffs as a cost-cutting measure.
- In a single day, Intel's market cap fell by $32 billion.
Intel's nightmare year continues. Fresh on the heels of laying off 15,000 employees and amidst a class action lawsuit about failing 13th Gen and 14th Gen CPUs, Intel now faces a lawsuit from its shareholders. The lawsuit claims that Intel hid issues that led to the company's market value dropping $32 billion in one day.
"[The] company's materially false or misleading statements regarding the business and its manufacturing capabilities inflated its stock price from Jan. 25 to Aug. 1," claims the suit.
Intel CEO Patrick Gelsinger and CFO David Zinsner are the respondents of the lawsuit, which was filed on Wednesday, August 7, 2024 in San Francisco federal court. According to Reuters, Intel shareholders were blindsided by the fact that Intel's foundry services are "floundering," in the words of the shareholders.
Intel announced 15,000 layoffs on August 1, 2024. That move was made in an effort to save $10 billion through 2025.
"Our revenues have not grown as expected—and we've yet to fully benefit from powerful trends, like AI," said Gelsinger. "Our costs are too high, and our margins are too low. We need bolder actions to address both—particularly given our financial results and outlook for the second half of 2024, which is tougher than previously expected."
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Intel Foundry services began in 2021 as a radical idea to have Intel create chips for its rivals and other companies. But Intel Foundry has faced struggles, including losing $7 billion in 2023. It appears that the service has failed to meet expectations, leading to shareholders feeling blindsided.
Following the August 1 news about Intel's earnings, Intel's stock price plummeted. Intel reported a net loss of $1.61 billion in its quarterly report, due in part to a 99% dip in revenue. Intel announced it would cut costs by reducing its employee headcount by more than 15%. The chipmaker also suspended its dividend starting in Q4 2024. At one point the chipmaker's market cap fell $32 billion in a single day.
Intel will have to navigate its various legal battles and overcome its revenue loss while preparing for the launch of its Lunar Lake mobile CPUs. Those processors are meant to compete with Qualcomm's Snapdragon X processors and AMD's new Ryzen AI 300 Series mobile chips.
