With the US markets closed, Intel reported its results for the first half of the year on Thursday. The figures that the chip manufacturer delivered, its less than optimistic forecasts for the future, problems with some of its CPU models and a cost-cutting plan that will result in the dismissal of 15,000 employees are the ingredients that are on track to cause Intel to experience its worst session on the stock market in 24 years this Friday. At the opening of Wall Street, its shares fell by 27%, thereby losing 33.3 billion dollars in market value. Intel, the company that once dominated the semiconductor industry, is now facing very difficult times.
The tech giant’s accounts are not good. According to the communication that Intel sent to the supervisor of the American marketshad losses of 2,091 million dollars during the first half of this year, a wound 61.46% deeper than the 1,295 million dollars it left in the same period of 2023. The quarterly comparison is even more bleeding. If in the second quarter of 2023 Intel made a profit of 1,473 million dollars, in the second quarter of this year, it has gone on to lose 1,654 million dollars.
Revenues rose 3.62% to $25.557 billion in the first half of the year. With production costs of $15.793 billion, $8.621 billion spent on R&D, $2.885 billion spent on marketing and $1.291 billion set aside for, among other things, the multiple lawsuits the company is facing, the numbers don’t add up.
The footprint of investments in the accounts shows that Intel is struggling to keep up with the other giants in the semiconductor sector, but even so, the competition is gaining ground. According to BloombergNvidia now more than doubles Intel’s quarterly sales. AMD, once a controversial company in this segment, is worth $100 billion more on the stock market and TMSC is globally recognized as the world queen of semiconductor production.
Taking advantage of the heightened concern about securing supply chains for critical components that has reached the United States and the European Union following the successive shock waves that have hit global trade in recent years, Intel announced an ambitious plan to build chip foundries in Europe and the United States. This division is also not doing well. The factories have brought in revenues of $8.7 billion, $300 million less than in the same comparable period last year. On the other hand, operating losses grew to $5.3 billion from $4.2 billion in the first half of 2023.
Beyond the accounts of the past months, another cause of great concern among the market has been the forecasts that Intel has revealed for this third quarter. The company estimates that sales will be in the range of between 12.5 and 13.5 billion dollars. Analysts expected 14.38 billion dollars in revenue on average. Added to all this accumulation of problems is the fact that some of Intel’s products, specifically the 13th and 14th generation processors, are experiencing failures, According to the specialized press. Users are experiencing unexpected system crashes and reboots. To deal with this storm, Intel has announced a plan that will include the dismissal of 15,000 people.
15,000 layoffs announced
In the presentation of the results, Intel announced a cost-cutting plan that includes laying off more than 15,000 workersroughly 15% of its workforce. In addition, the company will stop paying dividends to its shareholders starting in the fourth quarter of this year, a suspension that will remain in place at least until “cash flows improve.” Intel had paid dividends uninterruptedly since 1992.
“I have no illusions that the road ahead will be easy to navigate,” Intel CEO Pat Gelsinger said in a statement to employees. “You shouldn’t either,” he warned, calling the moves “some of the most profound changes Intel has ever seen.”
Still, Gelsinger is confident that Intel is on the right track in the long term. He argues that the vital chip manufacturing wing is on track to pick up steam and attract outside customers, justifying the plants Intel has announced it will build in the past. Gelsinger believes Intel is finishing paying the bill for staying competitive in the industry and will now have to focus on fixing its finances.
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