Intel Corporation INTC, though retaining the pole position in many of the segments it operates in, has lost the aura of invincibility around it. An analyst at Northland Capital Markets is of the view the company is better off splitting its business units.
The Intel Analyst: Gus Richard upgraded Intel from Underperform from Market Perform and maintained the price target at $46.
The Intel Thesis: Intel shares are down about 27% year-to-date, and much of the company's troubles are already priced in, Richard said in a note.
The chipmaker's struggles stem from miss-execution in manufacturing, a broken design environment, failure in the mobile market, and the inability to enter the foundry market.
This has left the company a subscale integrated device manufacturer, with increasingly uncompetitive products in terms of performance relative to Advanced Micro Devices, Inc. AMD. It also lags ARM in terms of power consumption and cost in its core markets.
It's time Intel toes in line with other leading-edge logic companies that have fab-light strategy, ultimately becoming fabless: "We believe the best outcome for shareholders is to break up the Company," Richard wrote in the note.
If Intel continues on its current trajectory, it will continue to lose market share and underperform, he said.
Northland suggests the breakup of Intel along the following lines:
- Altera, valued at $21B
- Moblieye at $30 billion
- NAND at $9 billion
- fabless product company, comprising Client Computing Group, Data Center Group and IoT, at $90B
- Manufacturing assets less NAND at $50 billion
- NAND flash $9 billion
- Intel Capital at $6.4 billion.
This yields a breakup value of $206 billion or $6 billion above INTC's current enterprise value.
"We believe each of these new companies has the potential to thrive as they would fit far better into the modern semiconductor ecosystem," the firm said.
At last check, Intel shares traded around $44.64.
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