Intel shares rose more than 3 percent in early trading on Friday after a report that the struggling chipmaker is exploring options that could include a merger or a split, cheering some investors after one of the company’s worst stock declines in decades.
The company is working with investment bankers and considering various options such as separating its core products business from its loss-making manufacturing unit, Bloomberg News reported Thursday.
Intel (NASDAQ:) is also discussing the possibility of canceling some factory projects, according to the report.
Building and expanding chip production sites is at the heart of Intel’s transformation efforts, which focus on becoming a contract manufacturer for other chip companies — a capital-intensive project that has strained the company’s finances.
Intel’s market value is expected to rise by more than $4 billion on Friday, after falling below the $100 billion mark earlier in August for the first time in three decades.
The report provided some comfort to investors, many of whom see splitting Intel’s business as an ideal option as the company advances into the age of artificial intelligence and follows chipmakers like Nvidia (NASDAQ:) and AMD (NASDAQ:).
Intel shares are down about 60% so far this year, compared with AMD’s less than 2% year-to-date. Nvidia shares have more than doubled in value this year.
Intel’s disappointing quarterly report earlier in August, coupled with the company’s halt of its dividend and announcement of layoffs affecting 15% of its workforce, deepened the stock’s decline.
The stock is trading at about 24 times expected earnings, compared to AMD’s price-to-earnings ratio of 30.6. Nvidia is trading at 33.7 times expected earnings.