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Intel to Divest Foundry Division for Core Focus: Stock to Gain?

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Per a Bloomberg release, Intel Corporation (INTC - Free Report) is undertaking a comprehensive strategic review of its businesses as it confronts severe financial difficulties and operational challenges.  This follows a dismal second-quarter 2024 performance that triggered a sharp decline in its stock. This review aims to address the company's current difficulties and pave a path forward in the highly competitive semiconductor market.

INTC’s Major Strategic Changes

Per the review, the company will likely consider several strategic options, including the potential split of its product design and manufacturing divisions and evaluating which factory projects might be terminated.  The company is also reportedly mulling the sale of its foundry operating segment that manufactures chips for external clients. The division reported an operating loss of $2.8 billion in its most recent quarter.

Will INTC Gain From the Changes?

Intel aims to focus more on its product business (collectively CCG, DCAI, and NEX), which generated 92% of total revenues in the last reported quarter. It is making solid progress in Intel Xeon processors with Intel Xeon 6 processor with Efficient-cores (E-cores), code-named Sierra Forest, marking the company’s first Intel 3 server product designed for high-density, scale-out workloads. Intel Xeon 6 processors with Performance-cores (P-cores), code-named Granite Rapids, are expected to begin shipping in the third quarter of 2024, along with the Intel Gaudi 3 AI accelerator.

Intel’s renewed focus on supplying not just chips but associated hardware puts it in a position of strength. It is well-positioned to tap the tremendous scope for growth leveraging leading-edge processing technology, which will increasingly be required to generate sufficient volumes at low cost. All these advancements are expected to create a significant amount of revenue for Intel in the upcoming quarters.

INTC Stock Price Performance

Shares of have lost 41.7% over the past year against the industry’s growth of 111.7%.

Zacks Investment Research
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INTC’s Zacks Rank and Key Picks

Intel currently carries a Zacks Rank #4 (Sell). 

Some better-ranked stocks in the broader industry have been discussed below.

Arista Networks, Inc. (ANET - Free Report) , sporting a Zacks Rank #1 (Strong Buy) at present, supplies products to a prestigious set of customers, including Fortune 500 global companies in markets such as cloud titans, enterprises, financials and specialty cloud service providers. You can see the complete list of today’s Zacks #1 Rank stocks here.

It delivered a trailing four-quarter average earnings surprise of 15.02%. In the last reported quarter, Arista delivered an earnings surprise of 8.25%.

Harmonic Inc. (HLIT - Free Report) enables media companies and service providers to deliver ultra-high-quality broadcast and OTT video services to consumers globally. It delivered a trailing four-quarter average earnings surprise of 32.5%. It currently sports a Zacks Rank of 1.

Airgain, Inc. (AIRG - Free Report) currently carries a Zacks Rank #2 (Buy). It has a long-term earnings growth expectation of 35%.

Headquartered in San Diego, CA, Airgain offers integrated wireless solutions in the form of antenna products. These products are equipped to solve critical connectivity needs in both the design process and the operating environment across the enterprise, automotive and consumer markets. Ideal for original equipment and design manufacturers, vertical markets, chipset vendors, service providers, value-added resellers and software developers worldwide, the customizable antennas from Airgain serve both indoor and outdoor connectivity issues.

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