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Fortune
Fortune
David Meyer

Why Intel is doing worse in this notebook recovery than it did a decade ago

Pat Gelsinger, chief executive officer of Intel Corp., holds a wafer as he speaks at the Computex conference in Taipei, Taiwan, on Tuesday, June 4, 2024. (Credit: Annabelle Chih—Bloomberg/Getty Images)

Today is Data Sheet’s tenth birthday, and on occasions like these it’s always fun to look back and see how much has changed over the years—and how much hasn’t.

It’s remarkable that the very first story mentioned in Data Sheet’s inaugural edition was about HP accusing Autonomy founder Mike Lynch of fraud. That epic battle, which revolves around the $11 billion valuation at which HP bought Autonomy back in 2011, is still playing out a decade later.

HP won its U.K. civil fraud case in 2022 and hopes to see the repayment of over $4 billion—but, while former Autonomy chief financial officer Sushovan Hussein received a five-year sentence in a U.S. criminal trial in 2019, Lynch himself was acquitted there in June of this year. (Lynch said last week that he would have been found guilty had he not been rich.)

Some themes in that first edition have contemporary echoes. Ten years ago, enterprises were trying to figure out their return on investment for cloud computing and big data, much as they are now for AI, which is generally still a matter of cloud and big data. Some remain even more comparable today—an item in that first edition noted that notebook shipments were enjoying a revival, much as they are again this year after a post-pandemic lull in the segment.

One thing’s for sure: Intel was doing a lot better during that laptop renaissance than it is now. On this day in 2014, having recently seen its stock recover after an iPad-induced notebook slump, the chip giant’s share price ended the day on $32.82. But after a 26% plunge on Friday followed by a broad stock market free fall this morning, Intel’s share price is down nearly 40% from its level a decade ago.

Intel’s latest slip followed its announcement last week of a massive cost-cutting push, involving 15,000 job losses and the suspension of its dividend, associated with a weakening bottom line—adjusted gross margins for the second quarter were down 38.7% year-on-year. And a big reason for that is Intel’s desperation to keep up in the new trend of AI PCs, in which Qualcomm is suddenly a serious competitor.

As the Motley Fool’s Timothy Green notes, Intel has only been able to ship over 15 million of its AI-processor-featuring Meteor Lake chipsets by having them made in Ireland, where production costs are higher than in Oregon. This year’s generation, Lunar Lake, will mostly be made in TSMC’s plants rather than Intel’s own. Again, outsourcing is more expensive than in-house production.

It will only be on the subsequent generation—Panther Lake, due to launch next year—that Intel will be able to bring that manufacturing back in-house, making 2026 the year when the company expects to see fat margins again.

Let’s see if CEO Pat Gelsinger, whose turnaround plans remain far from fruition, will still be around by then. Intel has dropped from #53 to #79 in the Fortune 500 over the last decade. In the Fortune Global 500 for 2014, Intel enjoyed the 195th spot, but in this year’s list—which is out this morning—it languishes at #261.

A lot can change in 10 years, especially in tech. Here’s to the next decade! More news below.

David Meyer

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