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Intel is sinking on Wall Street amidst redundant accounts, layoffs of more than 15% and suspended dividends

Intel's drastic restructuring due to AI challenges has caused a stock crash that could cost it up to $25 billion. Furthermore, the company risks a class action over stability problems with its Raptor Lake processors

Intel is sinking on Wall Street amidst redundant accounts, layoffs of more than 15% and suspended dividends

The race for the development ofartificial intelligence begins to claim its first victims. Intel, one of the leaders in the semiconductor industry, announced a massive restructuring plan which provides for the dismissal of over 15 thousand employees, equal to 15% of its workforce, and the suspension of dividends starting from the fourth quarter. This move reflects the growing challenges and growing pressure in the competitive AI race.

The market response was devastating: in the premarket, the actions of Intel are collapsed, and the loss in value could be up to $25 billion. And as if that wasn't enough, the company now finds itself in the crosshairs of one potential class action due to instability issues with its Raptor Lake processors. An explosive cocktail of financial and legal difficulties that will test Intel's resilience and resilience.

Intel's massive staff cuts

Intel's decision to reduce staff by over 15 thousand units, with the possibility of reaching up to 19 thousand, marks an unprecedented action in the company's recent history. THE cuts, expected by the end of 2024, aim to simplify the organizational structure and reduce operating expenses and in capital account of more $ 10 billion by 2025.

La renovation will focus primarily on administrative and support areas, seeking to optimize costs and improve profit margins. Despite the magnitude of the changes, Intel will need to carefully manage the process to maintain productivity and corporate culture.

Disappointing accounts and no coupon

I results financial of the second quarter were disappointinga turnover of $12,8 billion, down 1% from the previous year, and a net loss by $1,6 billion, compared to $437 million in the previous quarter. The gross margin it fell to 35,4%, a decline of 0,4 percentage points. The Client Computing Group division saw growth of 9%, while Data Center and AI and Network and Edge saw declines of 3% and 1%, respectively. Intel Foundry reported a loss of $2,8 billion despite revenue of $4,3 billion.

To deal with the crisis, Intel decided to suspend dividends and concentrate resources on the investments necessary for restructuring. Dividends will only be reinstated when cash flows improve.

Crash on Wall Street

The US chip company is preparing to experience one of its worst collapses since 2000, with a perdita expected to nearly $ 25 billion of market value. In the premarket, the company's shares have already lost around 25%, signaling strong investor concerns and dragging the entire sector with them. This fall follows a 7% loss on Thursday, impacted by Arm Holdings' negative outlook. Once an industry leader with the well-known “Intel Inside” logo, the Santa Clara company now risks seeing its market capitalization drop to around $100 billion, far below that of Nvidia and Advanced Micro Devices, its main rivals.

Possible class action coming soon

The difficulties for Intel seem to never end. Now, the law firm Abington Cole + Ellery is considering starting one class action against the company due to instability problems found in 13th and 14th generation Raptor Lake processors. Intel recently admitted that these chips can become unstable under high operating voltages and promised to release a patch by mid-August. However, the effectiveness of this update remains uncertain and may not resolve issues on already faulty processors.

Additionally, there are rumors suggesting a possible oxidation defect in the early 13th generation Core processors, which may have contributed to the current problems. Despite improvements in manufacturing, some users have reported difficulties replacing faulty chips. Abington Cole + Ellery is evaluating whether there are sufficient grounds and plaintiffs to proceed with the class action.

The words of CEO Pat Gelsinger

The CEO of Intel, Pat Gelsinger, described the company's current situation as extremely difficult. In an internal memo, Gelsinger expressed his displeasure at the heavy staff cuts and suspension of dividends. “This is painful news for me to share,” he wrote, explaining that Intel needs “fewer people on site and more people in the field, supporting customers.”

Gelsinger also explained that suspending dividends is a necessary measure to focus on the balance sheet and reduce debt. “Our goal is to pay a competitive dividend in the future,” he said. He stressed that the restructuring is essential to improve efficiency and make Intel more competitive in the long term. Despite the challenges, he reiterated the company's commitment to building a more resilient semiconductor supply chain and restoring its market position.

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