Activist investor Dan Loeb on Tuesday urged Intel to explore strategic alternatives, including a possible breakup of the chipmaker and the sale of assets.
Loeb’s fund, Third Point LLC, has “built a significant stake" in Intel and plans to push for changes, including potentially nominating board directors, he wrote to Intel Chairman Omar Ishrak. The investor also said the computer chip giant has dramatically underperformed in the past five years, including losing more than $60 billion in market value this year alone.
“We cannot fathom how the boards who presided over Intel’s decline could have permitted management to fritter away the company’s leading market position while simultaneously rewarding them handsomely with extravagant compensation package," Loeb said in the letter adding, “Stakeholders will no longer tolerate such apparent abdications of duty."
Third Point's letter indicated Intel has lost its pole position in microprocessor manufacturing to Taiwan Semiconductor Manufacturing Co and South Korea's Samsung Electronics Co Ltd, and others.
Intel customers, such as Apple Inc, Microsoft Corp and Amazon.com Inc, are developing their own in-house silicon solutions and sending those designs to be manufactured in East Asia, Loeb wrote. He suggested Intel must offer new solutions to retain these customers rather than have them send their manufacturing away.
Intel's response leads to share price hike
Responding to the letter, Intel said it is prepared to work with the hedge fund on changes to its business to boost shareholder value.
"Intel Corporation welcomes input from all investors regarding enhanced shareholder value," the California tech giant said adding, "In that spirit, we look forward to engaging with Third Point LLC on their ideas towards that goal."
Following this, Intel shares rose 6.1% to $49.95, the most in more than eight months on the news, giving the company a market value of more than $200 billion. The stock had declined about 21% this year, compared with a 43% rise in the Nasdaq Composite Index.
Intel is in the midst of its worst crisis in at least a decade. The Santa Clara, California-based company has been the largest chipmaker for most of the past 30 years by combining the best designs with cutting-edge factories. Most other U.S. chip companies shut or sold plants and tapped other firms to make the components. Intel held out, arguing that doing both improved each side of its operation and created better semiconductors. That strategy is being questioned now as the company’s manufacturing capabilities fall behind the new industry leader Taiwan Semiconductor Manufacturing Co.
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December 30, 2020 at 11:11AM
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Intel agrees to change market strategy to keep up with competitors - Mint
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