Shares of Intel (NASDAQ: INTC) were on the move Friday within the wake of reports reports that the corporate was considering the potential of spinning off its manufacturing arm from its core chip design operation as a way to rehabilitate itself and create value for shareholders.
That news got here after a disastrous earnings report earlier this month that included weak results, disappointing guidance, the elimination of the stock’s dividend, and a restructuring plan that can cut not less than 15% of its workforce.
Investors, who’ve been longing for any signs of change at Intel, cheered the news, sending the top off by 7.6% as of 1:10 p.m. ET.
Is it time to interrupt up Intel?
In accordance with Bloomberg, Intel is discussing strategic options with investment bankers — options that would include splitting its two primary business segments or ditching among the planned factory expansions which have been the cornerstone of CEO Pat Gelsinger’s transformation strategy.
Intel’s board is anticipated to review a variety of options in September.
It shouldn’t come as an enormous surprise that Intel is considering such major changes, because it’s clearly flailing, and the stock is hovering around 20-year lows.
Is Intel stock a buy on the news?
At this point, Friday’s gains look more like a dead cat bounce for the stock than anything fundamentally meaningful. Cleaving the manufacturing business from the remainder of the corporate might be a win for investors because the foundry operations have been a drag on its overall results, but doing so would also undermine Gelsinger’s long-term strategy. Such a change might even call for a latest CEO.
While the problem is price watching, and investors should listen to any news coming out of next month’s board meeting, Friday’s jump looks as if more of an indication of desperation from investors than an actual reason to purchase the stock.
Expect the volatility in Intel shares to proceed as its restructuring still has an extended solution to go.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Idiot recommends Intel and recommends the next options: short November 2024 $24 calls on Intel. The Motley Idiot has a disclosure policy.
Intel Stock Is Soaring. Can a Breakup Plan Save the Company? was originally published by The Motley Idiot