Intel stock (INTC) popped 6% early on Sept. 17 after the chip maker announced plans to separate its foundry business into an independent unit with its own board and the ability to raise outside capital. Intel shares finished the trading day up 2.7%.
The company also announced that it has been awarded a new grant and inked a deal with a Mag 7 technology leader.
Related: Intel's future suddenly may be in doubt
Earlier this year, Intel separated the financial reporting for the foundry business.
“A subsidiary structure will unlock important benefits. It provides our external foundry customers and suppliers with clearer separation and independence from the rest of Intel,” said Intel’s chief executive, Pat Gelsinger, in a statement on Sept. 16.
Intel Foundry’s leadership team will remain unchanged and continue to report to Gelsinger.
Shutterstock/TheStreet
Intel announces foundry business spinout
MarketWatch columnist Therese Poletti says the move is meant to help customers feel comfortable handing their chip designs to a competitor’s manufacturing division.
Related: Intel CEO Pat Gelsinger's turnaround plan gets massive boost.
“The company [Intel] has not been able to attract a big volume of customers for its manufacturing business. Its biggest customer to date so far has been Microsoft, and some in the industry have said competitors are nervous about giving over their intellectual property,” Poletti wrote.
Intel is also considering separating its foundry business into a new publicly traded company, according to a source who spoke to CNBC.
The foundry spinoff came after the chip maker released disappointing earnings for the second quarter.
Intel's financials, stock price force strategy change
For the quarter ended June 29, the company reported adjusted earnings of 2 cents a share, below the 10 cents analysts expected. Revenue of $12.83 billion was down 1% from a year earlier and missed the estimated $12.93 billion.
“Our revenues have not grown as expected — and we’ve yet to fully benefit from powerful trends like AI. Our costs are too high, our margins are too low,” Gelsinger said following the financial results.
Intel shares are down about 55% year-to-date, and management is eager to reverse the trend.
Related: Analyst says Intel should drop a key business to survive
Together with its Q2 earnings report, the company initiated a $10 billion cost savings plan, including the layoff of 15,000 employees, 15% of its total workforce. The layoff is expected to be completed this year.
"This is the biggest restructuring of Intel, I'd say, since the memory microprocessor decision four decades ago," Gelsinger said in a Yahoo Finance interview.
Intel announces its teaming up with Amazon
Intel also announced on Sept. 16 a partnership with Amazon Web Services, including co-investments in custom chip designs.
More AI Stocks:
- Palantir stock leaps on big S&P 500 boost for data analytics group
- Veteran fund manager unveils startling Nvidia stock forecast
- Analysts reset Alphabet stock price target before key September court event
Intel Foundry will produce an AI fabric chip for AWS on Intel 18A, which is the company’s biggest innovation since it introduced FinFETs in 2011.
“We are beginning to see a meaningful uptick in interest from foundry customers," Gelsinger said. "This includes continued momentum in advanced packaging, which remains a meaningful differentiator for Intel Foundry as we have tripled our deal pipeline since the beginning of the year.”
Related: Veteran fund manager sees world of pain coming for stocks
