Intel CEO Pat Gelsinger has tasked his team with finding new cost savings as the chip giant tries to recover from a difficult second quarter while rebuilding the company for the future.
“It’s time for some austerity,” Gelsinger told Yahoo Finance on Friday (video above). “We had things that we built over the last decade that needed to be cleaned up. It helps accelerate the pace of the transformation that we have going on.”
Gelsinger told investors on the company’s second-quarter conference call last week that he has exited six businesses since taking over as CEO in 2021. Most recently, the company exited its drone business.
In total, those six exits freed up $1.5 billion for Intel to invest elsewhere in its business, Gelsinger said. The company also remains on track to spin off its self-driving technology business Mobileye later this year, a move that will free up additional resources.
These business exits come at a critical time for Intel, as it invests aggressively in its nascent foundry business and in new chips to regain market share from the likes of AMD. They also arrive as Intel’s struggles deepen in the second quarter due to product delays and flagging consumer demand for PCs.
Here’s how Intel performed against Wall Street estimates for the second quarter:
Custom Sales 2 Q: $15.32 billion versus $17.96 billion
2Q Adjusted Gross Margin: 44.8% vs. 51%
2Q Adjusted Operating Margin: 9.2% vs. 18.7%
2Q Adjusted EPS: $0.29 vs $0.69
Custom Sales 3 Q: $15 to $16 billion versus $18.7 billion
3Q Adjusted EPS: $0.35 vs. $0.82
Full Year Adjusted Sales: $65 to $68 billion versus $75 billion
Adjusted EPS for the full year: $2.30 vs. $3.39
Intel shares fell more than 8% in Friday’s session. Seven Wall Street firms cut their ratings on Intel stock amid skepticism about a fourth-quarter business recovery.
Gelsinger told Yahoo Finance Live last week that the business was “bottoming out,” with trends expected to improve from there as product backlogs ease and seasonal forces increase and stimulate demand.
“Going forward, we believe Intel’s weak report will likely further reinforce the company as a ‘show me story’ until advances in manufacturing technology, product competitiveness and financial returns become more apparent to investors,” the analyst wrote of Deutsche Bank, Ross Seymore. customers. “In our view, the first time Intel will rebuild credibility in its strategy will likely come in 4Q12, as the company’s updated guidance implies a large enough lift in revenue and margins that are likely to be seen optimistically until they surrender.”
Seymore reiterated a Hold rating on Intel shares, but lowered his price target to $38 from $45.
Brian Sozzi is editor-in-chief and Anchor on Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and up LinkedIn.
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