Today: 21-04-2024

Unleashing Intel's Reverse Bullwhip Dynamics: A Powerful Force in Motion

NEW YORK, Oct 27 (Reuters Breakingviews) — Intel's resilience shines through a turbulent post-Covid era, as CEO Pat Gelsinger navigates the $150 billion chip giant through a challenging landscape. The initial surge in PC sales driven by the work-from-home trend took an unexpected turn, impacting both sales and the company's substantial gross profit margin. While full recovery remains elusive, the latest financial results, unveiled on Thursday, indicate a slowing decline and a glimmer of hope emanating from a promising new division.

In the quest to reclaim technological dominance from arch-rival Taiwan Semiconductor Manufacturing (TSMC), Intel requires a substantial influx of cash. The collapse of the PC market further complicates this objective, leading to under-utilized factories and diminished profits due to dwindling demand. However, signs of stabilization emerge as the gross margin leaps from 36% to 43% in the last quarter, accompanied by a gradual tapering of revenue declines.

A beacon of optimism for Intel lies in its foundry business, a strategic move by Gelsinger to produce chips designed by external entities. Despite incurring losses, this unit is showing signs of growth and revenue escalation, prompting a 10% surge in Intel's stock on Friday. Customers are cautiously committing, contingent on Intel's manufacturing technology meeting specific milestones, positioning this division as the linchpin of the company's future.

With the absence of unforeseen delays and the company's metrics finally aligning favorably, the journey toward technological resurgence appears more tangible than just a day ago.

(By Jonathan Guilford)

(The author is a Reuters Breakingviews columnist. The opinions expressed are their own. Refiles to add byline.)

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In conclusion, Intel, under the leadership of CEO Pat Gelsinger, appears to be navigating the stormy seas of post-Covid challenges with resilience and strategic foresight. While the initial setback from the reversal in PC sales post work-from-home boom impacted both revenue and profit margins, the latest financial report suggests a slowdown in the decline.

Crucially, Intel's bid for cash to regain technological supremacy against rivals like TSMC seems to be gaining traction. Stabilization in gross margins, coupled with a burgeoning foundry business, where losses are narrowing, provides a glimmer of hope. The stock's 10% surge signals investor confidence in Gelsinger's vision and the potential of the foundry unit.

With the path to recovery looking more achievable and milestones in the foundry business becoming crucial markers for customer commitment, Intel stands at a pivotal juncture. The absence of unexpected delays and positive trending metrics instill a sense of optimism that the company might be on the brink of a transformative phase in its journey towards technological resurgence.