Friday is a better day for Intel Corp. shares after a rough month, but one expert says not to buy the source of the recent excitement.
The chipmaker is having a hard time because of high costs and disappointing sales trends. As a result, Intel INTC 8.02% announced earlier this month that it would be suspending its dividend and starting to lay off a lot of workers.
Recently, news stories have said that might not be the only big move. Overnight, Bloomberg News reported that the company was working with lenders to look at different business options. These options could include splitting the company’s foundry business or slowing down plans for growth.
Intel didn’t want to say anything about the story.
The company’s shares are up 9.6% so far today, making them the biggest gainers on the day compared to the S&P 500 SPX 0.15% and the Dow Jones Industrial Average DJIA -0.21%.
The stock is also on track to have its biggest one-day gain since 10.7% on Oct. 28, 2022.
Jordan Klein, a desk-based analyst at Mizuho, said, “Don’t fall for it.”
He wrote in a note to clients Friday, “My take is that a split for [Intel] could help at least unlock some value for the product-design business. But the fate of that [business] is closely tied to the execution and success” of Intel’s foundry and manufacturing operations.
“This kind of feels like a last-ditch effort or last-ditch hope,” though Chief Executive Pat Gelsinger might think about it if it means he can keep his job. According to Bloomberg News, a split would be a big change in strategy for Gelsinger, who has been betting on Intel to become the world’s leading chipmaker again. The story also said that Intel might choose a less bad case before going that way.
Still, Klein thinks that a split of the foundry business “in the end this will only minimally scare a few [Intel] shorts” and won’t get much interest from mutual funds that only invest in long-term growth.
