Intel Cuts Dividend by 66%

[Arthur Hanson]

Intel's model is clearly in trouble and has serious flaws. I hope Pat Gelsinger can bring some innovative thinking to not only Intel's business plan, but structure. Using old school thinking will not help Intel. One advantage Gelsinger has is some honeymoon left over to try using creativity to create something totally new and different. He is not going to create a winner by sticking to the business practices of the past. Now is his chance to step up and try something totally new. It will require hard thinking, creativity and great teamwork. I feel his best first moves is the to build some new and creative supplier and customer relationships in the areas they still have some strength. The same old methods will just lead to obscurity. His time is rapidly running out as Samsung and TSM will crush what is left with their US and other fabs. His time is rapidly running out and I hope for the best. He will have to pick his future ventures wisely. I have seen many times companies either get creative or die when their backs are against the wall.

Intel cuts dividend by 66% in bid for 'improved financial flexibility'

Intel is cutting its dividend by 66% as it deals with challenges in its business and a continued need for investment.

www.marketwatch.com

 

[hist78]

Intel slashes dividend by over 65%, to 12.5 cents

Intel slashed its dividend from 36.5 cents to 12.5 cents, a 65% reduction that comes just weeks after the chipmaker announced wide-ranging compensation cuts.

www.cnbc.com

 

[blueone]

It's about time. Of course, Gelsinger and his BoD don't look especially good right now, having just said weeks ago they were going to defend the dividend. And, as predicted by so many of us, INTC is flat to slightly up at the time of this posting. Not collapsing as so many predicted.

 

[Mooredaddy]

Very obvious. Good decision for the health of the company. I do wonder if it will be enough. From what I just checked they paid out about $6 billion last year and are now cutting that 66% so will be saving about $ 4 billion over an entire year. Hardly enough to change the strategic position of the company but at least a move in the right direction.

 

[count]

Anyone surprised?

I don't know if this will mean much to the stock price since a dividend cut was broadly anticipated. Intel on the verge of being under $100b market cap, and that's really something.

 

[nghanayem]

It's about time. Of course, Gelsinger and his BoD don't look especially good right now, having just said weeks ago they were going to defend the dividend. And, as predicted by so many of us, INTC is flat to slightly up at the time of this posting. Not collapsing as so many predicted.

When your wrong your wrong. In this case I am happy to be wrong. It seems I might have overestimated how short sighted wallstreet can sometimes be. Another potential option is that the only people holding the stock at this point are those that expect an intel turn-around. If this is the case I wonder if we would have seen a much larger drop if this cut happened in 2021? Either way the extra cash can probably build out a shell with cash to spare (at the D1X mod 3 ribbon cutting ceremony they said that it cost $3bil to build).

 

[blueone]

When your wrong your wrong. In this case I am happy to be wrong. It seems I might have overestimated how short sighted wallstreet can sometimes be. Another potential option is that the only people holding the stock at this point are those that expect an intel turn-around. If this is the case I wonder if we would have seen a much larger drop if this cut happened in 2021? Either way the extra cash can probably build out a shell with cash to spare (at the D1X mod 3 ribbon cutting ceremony they said that it cost $3bil to build).

I wouldn't worry about it. Your posts add a lot of value here.

If Intel doesn't doesn't turn around and loses stature the entire computing industry will be hurt. I can easily argue that Intel is most indispensable company in the chip industry from the perspective of driving standards and enabling software. No other company comes close.

 

[hist78]

I wouldn't worry about it. Your posts add a lot of value here.

If Intel doesn't doesn't turn around and loses stature the entire computing industry will be hurt. I can easily argue that Intel is most indispensable company in the chip industry from the perspective of driving standards and enabling software. No other company comes close.

The semiconductor industry without a near monopoly (or dominated) Intel might be a good thing.

 

[Daniel Nenni]

I'm guessing stock buybacks will also be cut?

I think Pat is doing a good job with what he has to work with. He has a much stronger headwind than anyone expected and it may get stronger before 2023 is said and done.

Inside the semiconductor ecosystem I am seeing AMD getting much stronger competitively and a lot more of what we call bespoke silicon coming from the cloud companies. So Intel has competitive pressures like never before. That and losing the process lead really puts Intel's back to the wall. In the semiconductor world that is what we call a pivot point. Many of the top semiconductor companies have experienced pivots before and came out stronger. In my opinion Intel will do the same. It may not be IDM 2.0 exactly but it will be manufacturing based and it will be disruptive, my opinion.

 

[blueone]

The semiconductor industry without a near monopoly (or dominated) Intel might be a good thing.

Intel seems unique both now and historically when it comes to driving standards and enabling. Even the big cloud companies are not in the same league. Look at this list of industry specs originally written, conceived, or driven by Intel and are now indispensable:

PCI
PCIe
USB
Thunderbolt
NVMe
NVMeoF
UCIe
CXL
Ethernet (Yeah, Ethernet. Most people don't know it, but DEC, Intel, and Xerox banded together to create the 1.0 Ethernet specs contributed to create the IEEE 802.3 standard.)

I'm probably missing a few, but I know of no other hardware company (even IBM) that has this impact. If Intel shrinks to being a second-tier company I do think the industry will suffer, unless a successor appears.

 

[hist78]

Intel seems unique both now and historically when it comes to driving standards and enabling. Even the big cloud companies are not in the same league. Look at this list of industry specs originally written, conceived, or driven by Intel and are now indispensable:

PCI
PCIe
USB
Thunderbolt
NVMe
NVMeoF
UCIe
CXL
Ethernet (Yeah, Ethernet. Most people don't know it, but DEC, Intel, and Xerox banded together to create the 1.0 Ethernet specs contributed to create the IEEE 802.3 standard.)

I'm probably missing a few, but I know of no other hardware company (even IBM) that has this impact. If Intel shrinks to being a second-tier company I do think the industry will suffer, unless a successor appears.

The world is very different now. There are many strong players, big or small, doing interesting and innovative things that Intel may or may not be involved. We are not in Kansas anymore.

 

[blueone]

The world is very different now. There are many strong players, big or small, doing interesting and innovative things that Intel may or may not be involved. We are not in Kansas anymore.

Doing innovative and interesting things is different than driving the industry. Nvidia is doing many (many!) interesting things, especially for their own ecosystem, but it's mostly proprietary, a la IBM's history. The last industry spec I saw Nvidia drive was, if my memory is serving me well (not so much lately), FP8, a spec for an 8-bit floating point definition.

 

[nghanayem]

Many of the top semiconductor companies have experienced pivots before and came out stronger. In my opinion Intel will do the same. It may not be IDM 2.0 exactly but it will be manufacturing based and it will be disruptive, my opinion.

Care to elaborate what you might be thinking? By not IDM2.0 but manufacturing based, do you mean going back to being a pure IDM? Or are you thinking there might be a gradual move to being pure play? The final manufacturing centric idea I can think of would be the creation of the first foundry+IDM where regular foundry/systems foundry acts as the main business with traditional IDM becoming similar to what NEX is for intel right now (with the obvious caveat that the IDM part delivers the core IP that IFS would licence out)?

 

[Tanj]

I'm probably missing a few, but I know of no other hardware company (even IBM) that has this impact. If Intel shrinks to being a second-tier company I do think the industry will suffer, unless a successor appears.

It is instructive to look at what happened with CCIX vs. CXL just a few years ago. Intel was not in the game at all, AMD had functional CCIX silicon (Rome) samples in customer hands with active development. Then CXL is announced and AMD quietly folds within months and those customers quietly agree. Why? Because Intel had a deep bench on customer support. As one of my colleagues put it "If I have a CXL problem I know Intel will support me debugging and correcting it". They'll put a ton of documentation out, the spec itself will be high quality and updated, and there will be a vision and resources on future versions.

They built their reputation on that support for the ecosystem, and they built it early. In a small startup in 1980 we got outstanding support on the 8086.

But this is also a huge expense for them. Classify it as "customer acquisition" perhaps, but it also is ripe for cuts. I wonder how Intel cuts are affecting its standards activity, including support. If they lose that, next time it will be CCIX that wins and CXL which is a proud dead-end.

 

[count]

I'm guessing stock buybacks will also be cut?

I think Pat is doing a good job with what he has to work with. He has a much stronger headwind than anyone expected and it may get stronger before 2023 is said and done.

Inside the semiconductor ecosystem I am seeing AMD getting much stronger competitively and a lot more of what we call bespoke silicon coming from the cloud companies. So Intel has competitive pressures like never before. That and losing the process lead really puts Intel's back to the wall. In the semiconductor world that is what we call a pivot point. Many of the top semiconductor companies have experienced pivots before and came out stronger. In my opinion Intel will do the same. It may not be IDM 2.0 exactly but it will be manufacturing based and it will be disruptive, my opinion.

Indeed many top semiconductor companies have pivoted, but most had to hit rock bottom and many brushed with bankruptcy before the pivot materialized meaningfully. I personally don't believe that Intel has been sufficiently humbled. They still think they are an 800lb gorilla, when the reality is they are a chimpanzee. They need to accept reality and make much more drastic changes before things can turn around.

I am talking about shedding everything except the very core, and focusing on that with a team 1/10th the size of current Intel. No more venture capital arm, no more pet projects, no more software division (except for critical things like drivers), no more peripheral business, finish spinning off Mobileye at whatever valuation the market will give them. Executive salaries also reset to those in line with a company 1/10th the size of current Intel.

People who have followed me on this forum know I have been predicting Intel's decline for several years, and I don't think the decline is anywhere near over. Think it's bad now? Recession hasn't even started yet!

 

[hist78]

Doing innovative and interesting things is different than driving the industry. Nvidia is doing many (many!) interesting things, especially for their own ecosystem, but it's mostly proprietary, a la IBM's history. The last industry spec I saw Nvidia drive was, if my memory is serving me well (not so much lately), FP8, a spec for an 8-bit floating point definition.

It's good to be an industry leader who is setting the industry standard. As matter of fact, Pat Gelsinger repeatedly mentioned that he told his grandkids he was the person who helped to set the USB standard.

But today Intel is fighting for its survival due to the shrinking revenue and shrinking profit. Unless it can really bring in significant revenue and profit, Intel has to be careful about where it should put its attention to. R&D, patent applications, new and existing products and services, new business ventures, and industry standard setting are all good places to reexamine and rethink.

There are many companies who don't set many industry standards but make a lot good products and profit. At the current Intel's financial situation, the time and resources are brutally limited.

 

[blueone]

Interesting. I didn't know Gelsinger had anything to do with USB. Intel made a TV commercial about the engineer who invented it.

The rationale behind driving industry specifications was that if you wrote the initial version of the spec you could be first to market with the conforming silicon. It was a business advantage. Defining the spec also helps ensure that the initial spec doesn't define anything that's inherently nasty for your chip architecture.

The amount of resources dedicated to industry specifications in Intel is small in the grand scheme of things. Marketing, product planning, and project management are better targets for cutting, uh, I mean streamlining for efficiency.

 

[DaRAGingLunatic]

Intel cash on hand for the quarter ending December 31, 2022 was $28.338B, a 3.13% decline year-over-year.
Whilst their revenue has shrunk due to increasing competition, and the start of a large recession... I think they're still in the game and will be fine for a while yet.

I think consumer sentiment / spending during this recession time is quite a large drop. Just look at GPU shipments. 50% down. and that has nothing really to do with intel, just yet.

 

[hist78]

Intel cash on hand for the quarter ending December 31, 2022 was $28.338B, a 3.13% decline year-over-year.
Whilst their revenue has shrunk due to increasing competition, and the start of a large recession... I think they're still in the game and will be fine for a while yet.

I think consumer sentiment / spending during this recession time is quite a large drop. Just look at GPU shipments. 50% down. and that has nothing really to do with intel, just yet.

The amount of cash on hand is important for a company but it needs to be examined with the overall assets, liability, operations, sales, cash flow and competitors.

Cash on hand can be generated from selling products/services, borrowing money, issuing stocks, and selling lands and patents, etc. but offset by all kinds of labilities/payments such as loan premium and interest, equipment purchase, salary, bonus, dividends and taxes. In some cases, we can see a company with a dwindling revenue but a increased cash on hand number due to a big asset sale or corporate bond sale.

One important number for financial analysis is the cash flow from operating activities. In this regard Intel performed badly for the past three years (including the boom time of 2021 and 2022). The trend for Intel's cash flow from operating activities is worsen. If Intel can't change this downward trend, it will severely limit what they can do or can't do.

"Intel annual cash flow from operating activities for 2022 was $15.433B, a 47.61% decline from 2021.

• Intel annual cash flow from operating activities for 2021 was $29.456B, a 17.87% decline from 2020.
• 
  
• Intel annual cash flow from operating activities for 2020 was $35.864B, a 8.2% increase from 2019."

Source: https://www.macrotrends.net/stocks/charts/INTC/intel/cash-flow-from-operating-activities#:~:text=Intel annual cash flow from,a 8.2% increase from 2019.

 

[Arthur Hanson]

Any thoughts on Intel getting crushed between AMD and Nvidia? If not, what market segment will Intel fill?