How is Intel turnaround going?

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How is Intel turnaround going?

 How is Intel turnaround going?

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Summary

  • In 2021, Intel has embarked on turnaround plans under a new boss and activist investor. The company has significantly underperformed its peers as it has lagged in new technology development.
  • In March, the company has announced its investments and raised first quarter FY21 guidance due to better trading conditions.

Late last year, Third Point LLC Chief Executive Daniel Loeb asked the firm to improve shareholder value after buying a stake in Intel.

He highlighted that Intel competitors have moved to advanced technologies, while Intel is still behind. Besides, he asked for sweeping changes to deliver shareholder value.

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USD 20 billion investment 

On 23 March 2020, Intel has announced an expansion of a semiconductor manufacturing facility at its Ocotillo campus in Chandler, Arizona. The expansion of the facility was revealed as a part of Intel’s integrated device manufacturing (IDM) model strategy (IDM 2.0).

Intel’s two new factories will see an investment of nearly USD 20 billion. Under IDM 2.0, the company seeks to design, manufacture, and deliver leading products. The firm is targeting to become a major provider of foundry services in the US and Europe.

The expansion of the facility will also create significant job opportunities in the region. Intel estimated the investment would create over 3,000 high tech jobs, over 3,000 construction jobs, and around 15,000 local long-term jobs.

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In February, Pat Gelsinger joined Intel as Chief Executive. Under IDM 2.0, the firm intends to set a new era of innovation. Intel also reaffirmed its commitment to manufacturing the majority of products internally. It plans to become a leading provider of foundry services in the US and Europe.

Full-year outlook 

On 23 March, the company also said first-quarter 2021 revenue and EPS (non-GAAP) would exceed its previous estimates, driven by strong notebook demand. It expects strong PC demand and client CPU supply but also acknowledged a shortage of third-party components, which could impact PC revenue.

On a GAAP basis, Intel expects FY21 revenue of nearly USD 76.5 billion and earnings per share of USD 4. Capital spending is estimated at between USD 19-20 billion. On a non-GAAP basis, revenue would be around USD 72 billion and earnings per share of USD 4.55, while free cash flow is expected around USD 10 billion.

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