Intel CEO: ‘This is a time for a little austerity’

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Intel CEO Pat Gelsinger has tasked his team with finding new cost savings as the chip giant tries to fight back from a challenging second quarter while rebuilding the company for the future.

“This is a time for a little austerity,” Gelsinger told Yahoo Finance on Friday (video above). “We had things that we’ve made over the last decade that needed to be cleaned up. It helps speed up the transformation we’re going through.”

Gelsinger told investors during the company’s second-quarter conference call last week that he has left six companies since becoming CEO in 2021. More recently, the company has exited its drone business.

A passenger drone Volocopter 2x is on display at Intel’s booth at the Cebit technology show in Hanover on June 11, 2018. (Photo credit must be JULIAN STRATENSCHULTE/DPA/TBEN via Getty Images)

In all, these six exits have freed up $1.5 billion for Intel to invest elsewhere in its company, Gelsinger said. The company also remains on track to spin off its self-driving tech company Mobileye later this year, a move that should free up additional resources.

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These business shutdowns come at a critical time for Intel as it invests aggressively in its burgeoning foundry business and in new chips to regain market share from companies like AMD. They also arrive as Intel’s struggle deepened in the second quarter due to product slowdowns and dwindling consumer demand for PCs.

Here’s how Intel performed against Wall Street’s second-quarter estimates:

  • 2Q Adjusted Revenue: $15.32 billion vs. $17.96 billion

  • 2Q Adjusted Gross Margin: 44.8% vs 51%

  • 2Q Adjusted Operating Margin: 9.2% vs. 18.7%

  • 2Q adjusted earnings per share: $0.29 vs. $0.69

  • 3Q Adjusted Revenue: $15 Billion to $16 Billion vs $18.7 Billion

  • 3Q adjusted earnings per share: $0.35 vs $0.82

  • Adjusted sales for the whole year: $65 Billion to $68 Billion vs $75 Billion

  • Adjusted EPS for the whole year: $2.30 vs. $3.39

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Shares of Intel fell more than 8% in Friday’s session. Seven Wall Street firms downgraded Intel’s stock over skepticism about a business recovery in the fourth quarter.

Gelsinger told Yahoo Finance Live last week that the company was “on the downside,” with trends set to improve from there on as product slowdowns ease and seasonality increases, boosting demand.

“Looking ahead, we think Intel’s weak report is likely to further solidify the company as a ‘show me a story’ until advances in manufacturing technology, product competitiveness and financial returns become more apparent to investors,” wrote Deutsche Bank analyst Ross. Seymore in a note to customers. “In our view, Intel is likely to restore credibility to its strategy for the first time in 4Q22, as the company’s updated guidance represents significant increases in revenues and margins that will likely be viewed as optimistic until delivery.”

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Seymore reiterated a Hold rating on Intel stock, but lowered its price target from $45 to $38.

Brian Sozzi is a great editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn.

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