Shares of Intel (NASDAQ: INTC) Major electronics makers were on the move Friday following news reports that the company is considering separating its manufacturing arm from its core chip design process in order to reposition itself and create shareholder value.
The news comes after a disastrous earnings report earlier this month that included weak results, disappointing guidance, the cancellation of its dividend and a restructuring plan that will cut at least 15% of its workforce.
Investors, who had been eager for any signs of change at Intel, welcomed the news, sending the stock up 7.6% as of 1:10 p.m. ET.
Is it time to break up Intel?
Intel is discussing strategic options with investment bankers, Bloomberg reported — options that could include splitting its two main businesses or shedding some of the planned factory expansions that were a cornerstone of Chief Executive Officer Pat Gelsinger’s turnaround strategy.
Intel’s board of directors is expected to review a range of options in September.
It should come as no surprise that Intel is considering such major changes, as it is clearly suffering from weakness, with the stock hovering around 20-year lows.
Is Intel stock a buy on the news?
At this point, Friday’s gains look more like dead cat jump Separating the manufacturing business from the rest of the company could be a win for investors, as the casting operations have been a drag on the company’s overall results, but doing so would also undermine Gelsinger’s long-term strategy. Such a change would require a new CEO.
While the case is worth following, and investors should pay attention to any news coming out of next month’s board meeting, Friday’s jump looks more like a sign of desperation on the part of investors than a real reason to buy the stock.
Intel stock is expected to continue to be volatile as its restructuring process is still a long way off.
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Jeremy Bowman He has no position in any of the stocks mentioned. The Motley Fool recommends Intel and recommends the following options: Sell $24 November 2024 on Intel. The Motley Fool has Disclosure Policy.
Intel shares rise.. Can a plan to split the company save it? Originally posted by The Motley Fool
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