Intel (INTC) is set to report first-quarter earnings results after the market closes today, but the actual numbers don't matter all that much. We know the numbers won't be pretty and will simply underscore the chipmaker is an aging, ailing business.
Instead, focus on what new CEO Lip-Bu Tan says about where he is positioning Intel for the future.
Wall Street isn't expecting much from the chipmaker. Analysts are anticipating just a penny per share in profits for Q1 on $12.3 billion in revenue compared to the $0.18 per share on $12.7 billion it generated last year. That's a 94% plunge in earnings on a 3% decline in revenue.
Yet there is potential for Intel to beat expectations if consumers ran out to buy laptops and PCs ahead of any tariffs as it would pull forward sales into the quarter. That could set up the chipmaker for a weak second quarter, but again, the actual results are less important than what Tan says he plans for Intel going forward. He's already setting the groundwork for major changes.
Bloomberg reported Intel will report dramatic cuts to its workforce, firing as much as 20% of its employees in a bid to streamline a bloated managerial staff and create a business driven by engineers. With 108,900 employees at the end of 2024, that would amount to almost 22,000 workers being laid off, which would be on top of the 15,000 employees Intel fired last year.
The report caused INTC stock to jump 5.5% yesterday. Intel has lost 40% of its value over the past year and trades around $20 a share.
Other plans Tan has for the chipmaker include spinning off non-core assets while developing more relevant products. It was late to artificial intelligence, for example, and is far behind rivals Nvidia (NVDA) and Advanced Micro Devices (AMD).
Just last week INTC agreed to sell a 51% stake in its Altera programmable chips division to private equity firm Silver Lake Management. Earlier there were talks of selling its foundry and chip design businesses, potentially to a partnership between Taiwan Semiconductor Manufacturing (TSM) and Broadcom (AVGO).
Intel, of course, seems to be in turnaround mode all the time as former CEO Pat Gelsinger, who was ousted last December, failed to gain any traction with his plans. Tan, who was an executive at Cadence Design Systems (CDNS), came on board last month and began buying INTC stock. It was no doubt to show he is committed to the chipmaker, aligning his interests with those of shareholders, and investors should watch more of where he says he is taking Intel rather than where the chipmaker's been.
