Shares of Intel (NASDAQ: INTC) saw a significant increase on Friday following reports that the company was exploring the idea of separating its manufacturing arm from its core chip design business in order to revitalize itself and generate value for shareholders.
This news came after a disappointing earnings report earlier in the month, which included underwhelming results, bleak guidance, the suspension of the stock’s dividend, and a restructuring plan that will lead to a reduction of at least 15% of its workforce.
Investors, who have been eagerly anticipating change at Intel, reacted positively to the news, pushing the stock up by 7.6% as of 1:10 p.m. ET.
According to Bloomberg, Intel is in discussions with investment bankers about strategic alternatives, including potentially splitting its two main business segments or scrapping some planned factory expansions that have been central to CEO Pat Gelsinger’s transformation plan. The company’s board is set to evaluate various options in September.
It’s not surprising that Intel is contemplating such drastic changes, given its current struggles and the fact that its stock is trading near 20-year lows.
While the stock’s surge on Friday may seem like a positive development, it could be more of a temporary rebound than a substantial shift in fundamentals. Separating the manufacturing division from the rest of the company could benefit investors since the foundry operations have been a drag on overall performance, but it could also undermine Gelsinger’s long-term strategy and potentially necessitate a new CEO.
While the situation is worth monitoring, and investors should stay informed about updates from the upcoming board meeting, the recent jump in Intel’s stock price appears to be driven more by investor desperation than a compelling reason to buy the stock.
Expect continued volatility in Intel shares as the restructuring process is still in its early stages.