Intel 'looks forward' to engaging with activist investor Dan Loeb on exploring the company's strategic alternatives
Loeb's hedge fund, Third Point LLC, has a nearly $1 billion stake in Intel, according to sources familiar with the matter.
Intel says it "looks forward" to engaging with Third Point's Dan Loeb after the activist investor urged the tech giant to explore strategic alternatives, including whether the company should continue to be an "integrated device manufacturer" as well as potentially pursuing "divestment of certain failed acquisitions."
"Intel Corporation welcomes input from all investors regarding enhanced shareholder value," the company said in a statement. "In that spirit, we look forward to engaging with Third Point LLC on their ideas towards that goal."
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| INTC | INTEL CORP. | 24.05 | +0.40 | +1.69% |
Third Point has a nearly $1 billion stake in Intel, according to sources familiar with the matter. Intel shares rose as much as 6.1% on the news Tuesday, giving the company a market value of more than $200 billion.
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According to the letter reviewed by FOX Business, Loeb wrote that the company's most urgent task was to address its “human capital management issue”, noting that many of its talented chip designers and leaders have fled the company, and that those who remain are becoming “increasingly demoralized by the status quo”.
Loeb also argued that Intel has lost its pole position in microprocessor manufacturing to Taiwan's Semiconductor Manufacturing Co. and South Korea's Samsung Electronics Co. Ltd.
"Previously reliably able to progress its process technology every 2-3 years, Intel has been stuck at its 14-nanometer node since 2013, while TSMC and Samsung both transitioned to 5-nanometer this year and are developing more advanced process geometries," Loeb said. "Intel’s plan to roll out its 7-nanometer node late 2022 or early 2023 will place the Company several years behind its Asian peers for at least the first half of this decade. This lag in advanced semiconductor manufacturing is a vulnerability that must be corrected."
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| AMD | ADVANCED MICRO DEVICES INC. | 136.24 | -1.48 | -1.07% |
| NVDA | NVIDIA CORP. | 135.34 | -1.58 | -1.15% |
He argued that the loss in manufacturing leadership along with other missteps has allowed chipmaker Advanced Micro Devices to take "meaningful market share" in Intel's core PC and data center markets and NVIDIA Corporation to dominate the nascent market for training complex computational models used in artifical intelligence applications, an area where Intel has been largely absent.
"This raises a critical concern – the vital role of Intel’s products and services to America’s national security," Loeb added. “Without immediate change at Intel, we fear that America’s access to leading-edge semiconductor supply will erode, forcing the U.S. to rely more heavily on a geopolitically unstable East Asia to power everything from PCs to data centers to critical infrastructure and more.”
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Loeb also warned that Intel's customers, including Apple, Microsoft and Amazon, are developing their own in-house silicon solutions and sending the designs to be manufactured in East Asia.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| AAPL | APPLE INC. | 239.59 | +2.26 | +0.95% |
| MSFT | MICROSOFT CORP. | 430.98 | +7.52 | +1.78% |
| AMZN | AMAZON.COM INC. | 210.71 | +2.82 | +1.36% |
"You must be able to offer new independent solutions to retain those customers rather than have them send their manufacturing away," Loeb said. "Just as Netflix uses Amazon’s AWS for cloud services, Intel must figure out how to serve its competitors as customers."
While Third Point expects to have productive conversations with Intel going forward, the hedge fund plans to file for Federal Trade Commission approval to acquire incremental common shares and to reserve the option to submit nominees for election to Intel's board during its 2021 Annual Meeting, should it sense “a reluctance to work together to address the concerns” it raised.
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Intel is the latest target to enter the activist investor's crosshairs. Earlier this year, Loeb urged Disney CEO Bob Chapek to halt the company's $3 billion annual dividend payment and redirect the funds towards content production and acquisition for its streaming service, Disney+.