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Can Intel (INTC) Script Chip Turnaround as a Standalone Entity?
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Intel Corporation (INTC - Free Report) has created a buzz in the industry with the sudden announcement of its plans to separate its Programmable Solutions Group (“PSG”) operations into a standalone business. The decision is aimed to provide PSG full autonomy and flexibility to script its own growth trajectory within the FPGA industry that serves as a harbinger of technological innovations across diverse sectors.
With PSG scheduled to commence its standalone operations from the onset of 2024, Intel will report its results as a separate business unit beginning first-quarter 2024. Over the next two to three years, it intends to conduct an IPO for PSG while exploring opportunities with private investors for a probable stake, with Intel retaining the majority ownership.
Despite charting newer frontiers, the two companies are likely to remain strategically aligned and will work in unison to address key areas of the FPGA industry, which is expected to witness a CAGR of more than 9% from $8 billion in revenues in 2023 to $11.5 billion by 2027. In addition to unlocking more value through financial autonomy, the standalone business is widely expected to help the parent company regain its leading position in the semiconductor ecosystem through its unique relationship with Intel Foundry Services (“IFS”).
IFS has emerged as a linchpin in Intel's integrated device manufacturing 2.0 strategy, aimed at regaining technological leadership and enhancing manufacturing scale. Leveraging its internal relationship with IFS, PSG will be able to offer customers greater predictability of supply aligned to their needs, ensuring a more resilient supply chain to address fast-growing markets like automotive, data center and communications.
Sandra Rivera, executive vice president at Intel, has been given the role of chief executive officer of PSG. Widely acclaimed as being the key person in putting Intel’s DCAI business back on its growth track with a more competitive product roadmap, emphasis on delivering customer value and diligent execution of operational plans, Rivera is arguably the best candidate for spearheading these radical changes.
Intel has been lately facing dwindling overall sales largely due to PC inventory correction and contraction in the server market. Revenues declined significantly in first-quarter 2023 owing to a challenging macroeconomic environment, uncertain business conditions and softening demand trends.
Consequently, top management has embarked on a massive investment roadmap by developing new manufacturing hubs and improving its operating technology to retrieve its growth momentum. The spin-off of the chip business is probably another decisive step in that direction.
The stock has gained 29.1% over the past year compared with the industry’s growth of 123%.
Arista Networks, Inc. (ANET - Free Report) , carrying a Zacks Rank #2 (Buy), is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 18.7% and delivered an earnings surprise of 12.8%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
Motorola Solutions, Inc. (MSI - Free Report) , carrying a Zacks Rank #2, delivered an earnings surprise of 5.62%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 5.58%.
Motorola provides services and solutions to government segments and public safety programs, along with large enterprises and wireless infrastructure service providers. It develops and services both analog and digital two-way radio, voice and data communications products and systems for private networks, wireless broadband systems and end-to-end enterprise mobility solutions to a wide range of enterprise markets.
Ubiquiti Inc. (UI - Free Report) , carrying a Zacks Rank #2, is another stock worth mentioning in the broader industry. Headquartered in New York, it offers a comprehensive portfolio of networking products and solutions for service providers and enterprises at disruptive prices.
Ubiquiti boasts a proprietary network communication platform that is well-equipped to meet end-market customer needs. In addition, it is committed to reducing operational costs by using a self-sustaining mechanism for rapid product support and dissemination of information by leveraging the strength of the Ubiquiti Community.
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Can Intel (INTC) Script Chip Turnaround as a Standalone Entity?
Intel Corporation (INTC - Free Report) has created a buzz in the industry with the sudden announcement of its plans to separate its Programmable Solutions Group (“PSG”) operations into a standalone business. The decision is aimed to provide PSG full autonomy and flexibility to script its own growth trajectory within the FPGA industry that serves as a harbinger of technological innovations across diverse sectors.
With PSG scheduled to commence its standalone operations from the onset of 2024, Intel will report its results as a separate business unit beginning first-quarter 2024. Over the next two to three years, it intends to conduct an IPO for PSG while exploring opportunities with private investors for a probable stake, with Intel retaining the majority ownership.
Despite charting newer frontiers, the two companies are likely to remain strategically aligned and will work in unison to address key areas of the FPGA industry, which is expected to witness a CAGR of more than 9% from $8 billion in revenues in 2023 to $11.5 billion by 2027. In addition to unlocking more value through financial autonomy, the standalone business is widely expected to help the parent company regain its leading position in the semiconductor ecosystem through its unique relationship with Intel Foundry Services (“IFS”).
IFS has emerged as a linchpin in Intel's integrated device manufacturing 2.0 strategy, aimed at regaining technological leadership and enhancing manufacturing scale. Leveraging its internal relationship with IFS, PSG will be able to offer customers greater predictability of supply aligned to their needs, ensuring a more resilient supply chain to address fast-growing markets like automotive, data center and communications.
Sandra Rivera, executive vice president at Intel, has been given the role of chief executive officer of PSG. Widely acclaimed as being the key person in putting Intel’s DCAI business back on its growth track with a more competitive product roadmap, emphasis on delivering customer value and diligent execution of operational plans, Rivera is arguably the best candidate for spearheading these radical changes.
Intel has been lately facing dwindling overall sales largely due to PC inventory correction and contraction in the server market. Revenues declined significantly in first-quarter 2023 owing to a challenging macroeconomic environment, uncertain business conditions and softening demand trends.
Consequently, top management has embarked on a massive investment roadmap by developing new manufacturing hubs and improving its operating technology to retrieve its growth momentum. The spin-off of the chip business is probably another decisive step in that direction.
The stock has gained 29.1% over the past year compared with the industry’s growth of 123%.
Image Source: Zacks Investment Research
Intel currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Key Picks
Arista Networks, Inc. (ANET - Free Report) , carrying a Zacks Rank #2 (Buy), is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 18.7% and delivered an earnings surprise of 12.8%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
Motorola Solutions, Inc. (MSI - Free Report) , carrying a Zacks Rank #2, delivered an earnings surprise of 5.62%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 5.58%.
Motorola provides services and solutions to government segments and public safety programs, along with large enterprises and wireless infrastructure service providers. It develops and services both analog and digital two-way radio, voice and data communications products and systems for private networks, wireless broadband systems and end-to-end enterprise mobility solutions to a wide range of enterprise markets.
Ubiquiti Inc. (UI - Free Report) , carrying a Zacks Rank #2, is another stock worth mentioning in the broader industry. Headquartered in New York, it offers a comprehensive portfolio of networking products and solutions for service providers and enterprises at disruptive prices.
Ubiquiti boasts a proprietary network communication platform that is well-equipped to meet end-market customer needs. In addition, it is committed to reducing operational costs by using a self-sustaining mechanism for rapid product support and dissemination of information by leveraging the strength of the Ubiquiti Community.