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Intel cancels new Haifa development center

Daniel Nenni

Admin
Staff member

Intel Haifa.jpg

A parking lot for workers at the Matam technology park will be built instead. Meanwhile, Apple is about to inaugurate its new center in the same industrial zone.​

In May 2021, newly appointed Intel CEO Pat Gelsinger landed in Israel. Gelsinger had visited Israel several times, but this was his first visit in the capacity of CEO. He was appointed to head Intel after a troubled period on both the technological and management fronts that left the company lagging behind its competitors, but an atmosphere of optimism, high demand for semiconductors, and strong growth in the global technology industry, led it to embark on an extensive construction program.

During his visit to Haifa, Gelsinger revealed a $200 million plan to build a new center with thousands of square meters of space for sports and green areas, pop-up restaurants, cafés incorporating work spaces, a visitors center open to the general public, sophisticated laboratories, and an auditorium. On the roof of the building there was planned to be a health center with rooms for fitness training, yoga, and a spa, "with an amazing sea view" as was promised at the time.

Three months later, in the presence of Intel senior vice president Gregory Bryant, Haifa mayor Einat Kalisch-Rotem, and Karin Eibschitz-Segal, who is now joint-CEO of Intel Israel, the foundation stone was laid. Comic actor Guri Alfi was brought in as master of ceremonies, the press was invited, and a large buffet was laid on for the guests. No-one could have imagined that within a year and five months Intel would admit that construction of the center was being canceled and that the site would become a parking lot instead.

Now, all the plans have been shelved. Intel has confirmed that it will cancel construction of the new office building next to the Matam technology park in Haifa, and that instead a parking lot will be constructed for the benefit or workers in the park.

As far as is known, the Haifa municipality has received no request to change the zoning of the land.

Problems around the world

This is not the first case of its kind for Intel. Last month, the company delayed the construction of a new fab at Magdeburg in Germany. One of the reasons was that the company was waiting for additional government grants, with construction costs rising. Other construction projects have been canceled in Oregon and in India. The plans to complete a new Intel fab in Kiryat Gat, planned for inauguration next year, remain unchanged.

Unlike the construction of the fab in Germany, which has only been postponed, the construction of the development center in Israel (IDC12) has been canceled for various reasons. First of all, Intel has decided to start its global streamlining program with cancelation of small projects, reduction in the scope of agreements with contractors and consultants, and cutting down on real estate, rather than with employee layoffs.

Intel will probably not be able to avoid mass layoffs, but these plans will be delayed until later on in the year, or next year. The company is supposed to cut costs by $10 billion by 2025.

Secondly, Intel is not recruiting as it did in the past, and is managing with hybrid working arrangements at its existing development center in Haifa, which currently employs 5,000 people. Thirdly, the new building was designed from the start for employer branding purposes, with its extensive leisure areas, which were also going to serve the general public.

Intel Israel is still the country’s largest employer, with 12,000 employees plus another 2,000 at its Mobileye subsidiary, but because of the crisis in the global technology industry and competition with other semiconductor giants such as TSMC, Nvidia, Apple, and Amazon, its workforce has not grown in recent years.

The company did recruit the 1,000 people that Gelsinger promised it would on his visit to Israel as CEO, but a similar number of people has left.

Apple constructs new building

While Intel is canceling construction of its new development center, another US giant, Apple, actually plans to inaugurate its new building in the same industrial zone very shortly. "Globes" has learned that real estate company Bayside’s Matam East #1, meant to house Apple’s new development center, received an occupancy certificate last month. The building has 46,000 square meters of space, of which 28,000 square meters are above ground. It will start to be occupied within the next few months.

The second stage is Matam East #2, with 28,500 square meters above ground, also to be handed over to Apple. No response was received from Apple.

Intel stated in response: "Intel is acting to maximize the usage of its real estate with the aim of creating a dynamic and comfortable work environment for its employees, while cutting costs. We therefore decided to halt construction of IDC12 and complete construction of the parking lot."

 
what are they talking about? intel already announced mass layoffs 3 months ago.
 
From what I hear in Silicon Valley we will have record layoffs in 1H 2023. Not as bad as the Dot Com bust in the 1990s but bad enough. So it is not just Intel but it will be interesting to hear the Intel Q4 2022 investor call tomorrow.

-Intel is expected to post adjusted fourth-quarter EPS of $0.18 on Jan. 26.
-That would represent a year-over-year drop of 83%, while revenue is expected to drop 30%.
-The chip maker has been hit by slowing PC sales and data center spending as well as market share losses.
-Analysts at Citi and Susquehanna warned this week that Intel's annual guidance may miss consensus estimates.
 
From what I hear in Silicon Valley we will have record layoffs in 1H 2023. Not as bad as the Dot Com bust in the 1990s but bad enough. So it is not just Intel but it will be interesting to hear the Intel Q4 2022 investor call tomorrow.

-Intel is expected to post adjusted fourth-quarter EPS of $0.18 on Jan. 26.
-That would represent a year-over-year drop of 83%, while revenue is expected to drop 30%.
-The chip maker has been hit by slowing PC sales and data center spending as well as market share losses.
-Analysts at Citi and Susquehanna warned this week that Intel's annual guidance may miss consensus estimates.
Intel is dead in the water
 
Wouldn't that make its stock price crash and mean that Intel is further strapped for cash because their lenders start calling?
No. Intel's financial position is not dependent on its stock price. A high stock price can make acquisitions cheaper initially, but Intel's bigger problem right now seems to be cash flow. The dividend costs Intel about $6B in cash per year. (4.1B shares outstanding times $1.46/share annual dividend). IBM, GE, GM, and AT&T cut or eliminated their dividends and survived to get better. Intel also needs to stop buybacks, which last I saw were about $800M per quarter, though I'm not as sure how accurate this number still is.
 
No. Intel's financial position is not dependent on its stock price. A high stock price can make acquisitions cheaper initially, but Intel's bigger problem right now seems to be cash flow. The dividend costs Intel about $6B in cash per year. (4.1B shares outstanding times $1.46/share annual dividend). IBM, GE, GM, and AT&T cut or eliminated their dividends and survived to get better. Intel also needs to stop buybacks, which last I saw were about $800M per quarter, though I'm not as sure how accurate this number still is.
Somehow Intel diluted their shareholders by doubling stock based compensation last year. Just as they stock has fallen off a cliff along with financial performance.
 
Somehow Intel diluted their shareholders by doubling stock based compensation last year.
That's not really the case. One justifiable reason for buybacks is to offset the dilution done by issuing RSUs and options. Because Intel is still (apparently) doing buybacks, there hasn't been substantial dilution yet. Until Intel's cash flow position improves I think the dilution from employee compensation is justifiable.
 
That's not really the case. One justifiable reason for buybacks is to offset the dilution done by issuing RSUs and options. Because Intel is still (apparently) doing buybacks, there hasn't been substantial dilution yet. Until Intel's cash flow position improves I think the dilution from employee compensation is justifiable.
I’m not saying it was substantial I was just saying they doubled stock based comp and raised the total amount of shares outstanding. Also the latest report indicates zero share repurchases over 2022. I can link it but it’s there in the pdf. Shares out standing went up by about 50 million. Not huge but notable if trend continues.
 
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That's not really the case. One justifiable reason for buybacks is to offset the dilution done by issuing RSUs and options. Because Intel is still (apparently) doing buybacks, there hasn't been substantial dilution yet. Until Intel's cash flow position improves I think the dilution from employee compensation is justifiable.

Stock buybacks are 'marketed' as returning cash flow to owners/shareholders which it would be if the amount fully decreased the share count, but in reality it's just wasting the company's cash position to make management personnels millionaires. This is really big problem in many companies. The share holders get nothing in the end. Intel 2022 non-gaap eps $1.84 has 'share based compensation' adjustment of +0.76c, that's just disgusting. They changed how they calculate non-gaap results in 2022 just to hide the sbc.

For example google pays no dividend but has spend tens of billions in 'stock buybacks', yet the share count has barely come down in many years,. You know where the money went.
 
Stock buybacks are 'marketed' as returning cash flow to owners/shareholders which it would be if the amount fully decreased the share count, but in reality it's just wasting the company's cash position to make management personnels millionaires. This is really big problem in many companies. The share holders get nothing in the end. Intel 2022 non-gaap eps $1.84 has 'share based compensation' adjustment of +0.76c, that's just disgusting. They changed how they calculate non-gaap results in 2022 just to hide the sbc.

For example google pays no dividend but has spend tens of billions in 'stock buybacks', yet the share count has barely come down in many years,. You know where the money went.
You're over-simplifying the situation with buybacks, at least in the US. (I'm not familiar with tax laws in other countries.)

In the US dividends are double-taxed. This is because a company that pays dividends pays corporate income tax on their gross taxable income before dividends, and then the stockholders pay income tax on the dividends. Stock buybacks, in theory at least, increase the value of each share by increasing the proportion of the company each share represents, and it avoids the dividend recipient's income tax.

Buybacks also serve to prop up a company's share price, which allows shareholders to increase their capital gains. (Chevron is a good recent example, just announcing a huge $75B buyback program.) Capital gains are taxed at a much lower rate than regular income. Dividends are taxed as regular income.

I'm not a big fan of CNBC, but this interview with Warren Buffett discusses his view of buybacks:

 
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You're over-simplifying the situation with buybacks, at least in the US. (I'm not familiar with tax laws in other countries.)

In the US dividends are double-taxed. This is because a company that pays dividends pays corporate income tax on their gross taxable income before dividends, and then the stockholders pay income tax on the dividends. Stock buybacks, in theory at least, increase the value of each share by increasing the proportion of the company each share represents, and it avoids the dividend recipient's income tax.

Buybacks also serve to prop up a company's share price, which allows shareholders to increase their capital gains. (Chevron is a good recent example, just announcing a huge $75B buyback program.) Capital gains are taxed at a much lower rate than regular income. Dividends are taxed as regular income.

I'm not a big fan of CNBC, but this interview with Warren Buffett discusses his view of buybacks:


I agree that stock buyback can be a really great way to return cashflow to the shareholders and I also generally prefer stock buybacks over dividends, but only IF it's truly used to reduce the share count. And not to offset the dilution from stock based compensations sbc, the company is effectively just buying shares and giving those to the management.

You miss the point and look this too naively. The true motivation behind stock buybacks in many cases is only to use the sbc as a deceit to wash the cash for the management and make them multimillionaires. Shareholders get nothing in the end. Just look how google, salesforce and now intel etc waste huge amounts of money for sbc.
 
It's a big problem in way too many companies. Micron and Meta are also infamous for spending all the cashflow for stock buybacks only to offset the sbc dilution. Unfortunately there are just countless examples of this action nowadays.

It's a deep problem between the incentives of the company, shareholders and executives/directors. Ultimately it's just shortsighted bad management.
 
It's a big problem in way too many companies. Micron and Meta are also infamous for spending all the cashflow for stock buybacks only to offset the sbc dilution. Unfortunately there are just countless examples of this action nowadays.

It's a deep problem between the incentives of the company, shareholders and executives/directors. Ultimately it's just shortsighted bad management.
Just curious, you do understand that all (or nearly all) Intel, Google, Meta, Apple, Amazon, and Micron employees are granted RSUs as a portion of their compensation? Why is tying the compensation of employees, especially senior managers, to stock performance - which aligns employee interests with shareholder interests - bad management? Currently, the overall compensation of all of these companies' employees, especially senior management, has taken a large hit due to low stock prices. Intel, Micron, and Meta employees have taken especially big hits.
 
It's really bad management to steal from the company and diminish future value. It's the exact opposite they should be doing. Of course some sbc and spending buybacks to sterilize it is usually needed, to a limited degree it’s fine and normal. But wasting big part even 100% of free cash flow for that is just grossly immoral parasitic act. It's a basic red flag and every seasoned investor knows this problem. It isn't that complicated.
 
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