In the fierce competition in the global semiconductor industry, Intel, which is in a dilemma, sees &#34;spin-off&#34; as a new lifeline. However, Bernstein pointed out that the challenges Intel currently faces may not be easily resolved by simply spinning off or selling parts of its business.
Last week, according to Bloomberg, Intel has hired advisors to help them explore future strategic options, which may include splitting its product and manufacturing businesses, canceling projects, or engaging in mergers and acquisitions.
On September 3, Bernstein analysts Stacy A. Rasgon and Akhilesh Kumawat released a report stating that currently, whether as a whole or split, neither the foundry nor product business seems to be very attractive.
<blockquote>
Currently, its foundry business (IFS) is heavily dependent on Intel, and its product business is also structurally losing market share in the potentially long-term shrinking x86 CPU market. Analysts point out that unless Intel can attract a large number of third-party businesses, the spin-off does not make much sense.
</blockquote>
<h2>Under the profit crisis, spinning off businesses may be difficult to sustain</h2>
From a data perspective, the extent of Intel's &#34;collapse&#34; is staggering. The report points out that the company's revenue in 2024 may be nearly $40 billion lower than the target set at the 2022 analyst conference, with profit margins far below expectations, almost zero earnings, and may consume about $15 billion in cash this year, far from the breakeven point expected by management.
Although some voices in the market believe that spinning off companies can &#34;create value for shareholders,&#34; analysts are skeptical of this.
Currently, Intel is preparing for the spin-off, but specifically, its foundry business (IFS) is currently heavily dependent on Intel, and its manufacturing department is difficult to operate independently due to severe losses and insufficient scale.
Analysts believe:
<blockquote>
&#34;Unless Intel can attract a large number of third-party businesses, the spin-off does not make much sense, and this seems to take several years (if possible).&#34;
</blockquote>
Earlier, analysts at Morgan Stanley also pointed out that in terms of the foundry business, due to its dependence on the ability to provide funds for expensive cutting-edge research and production capacity, Intel's prospects in this business are unclear.
Furthermore, Intel's product business is also structurally losing market share, especially in the potentially long-term shrinking x86 CPU market. As for simply divesting the fabs, analysts believe &#34;this is also challenging&#34;:
<blockquote>
&#34;Although theoretically abandoning chip manufacturing plants may make sense (according to the current development path, they can be said to have a negative net present value for Intel), this would still require Intel to abandon its roadmap and fully outsource.&#34;
</blockquote>
<h2>&#34;So&#34; cash-strapped, caught in a dilemma</h2>
The report also mentioned that Intel may be considering accelerating the spin-off of Altera to raise cash and may suspend its project in Germany. Intel originally planned to eventually take Altera public, but now it seems they may be looking for a faster way to sell. At the same time, Intel may further reduce its stake in Mobileye
It is worth noting that Intel has previously announced cost-cutting measures, reduced capital expenditures, suspended dividends, subsidies, etc., which should have brought about approximately $40 billion in incremental revenue to the balance sheet by the end of 2025, but the company seems to be raising more cash by selling assets.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/d34b21a6-d968-4809-995f-b030365387d2.png/query-aW1hZ2VWaWV3Mi8yL3cvNjQw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/d34b21a6-d968-4809-995f-b030365387d2.png/query-aW1hZ2VWaWV3Mi8yL3cvNjQw"/>
Analysts believe that although the overall strategy may have made sense initially, the current development path of the business seems insufficient to support it to the end, and they may have gone too far to stop.
Bernstein ultimately rates Intel as &#34;market perform&#34; with a target price of $25. At the close, Intel was trading at $19.4 per share, down 0.15%.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/82ce62cd-a60c-4e95-a4bb-259397fe68ea.png/query-aW1hZ2VWaWV3Mi8yL3cvNjQw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/82ce62cd-a60c-4e95-a4bb-259397fe68ea.png/query-aW1hZ2VWaWV3Mi8yL3cvNjQw"/>

INTC

Bernstein analysts pointed out that Intel's Foundry Services (IFS) relies on internal sources and is losing market share in the shrinking x86 CPU market. Although Intel is considering spinning off the business as a strategic option, analysts believe that the spin-off would not make much sense unless it attracts a large number of third-party businesses. Revenue in 2024 is expected to decrease by $40 billion compared to 2022, with severe losses and cash consumption posing challenges to its independent operation

- Intel, amidst fierce competition in the global semiconductor industry, sees "splitting" as a potential lifeline, but analysts caution that its challenges may not be easily resolved through partial divestitures. The company is exploring strategic options, including splitting its product and manufacturing businesses, canceling projects, or engaging in mergers and acquisitions. Analysts highlight Intel's heavy reliance on its foundry services and the shrinking market share in the x86 CPU market, questioning the meaningfulness of a split without attracting significant third-party business.
- Financially strained, Intel faces a significant revenue decline by 2024, with profits far below expectations and cash reserves dwindling. Despite preparations for a split, challenges loom due to the interdependence of its foundry services and the manufacturing division's operational difficulties. Analysts doubt the immediate value creation potential of a split and foresee a prolonged timeline for attracting substantial third-party business.
- Intel contemplates expediting the divestiture of Altera for cash generation and potentially halting projects in Germany. The company had planned to publicly list Altera but now seeks quicker sale options. Cost-cutting measures, asset sales, and reduced dividends aim to bolster cash reserves, yet the current business trajectory appears unsustainable, prompting concerns about the company's strategic direction and financial stability.

Is it difficult for Intel to stand alone in the short term, and can splitting it up not save it?