Benchmark believes Intel’s latest move to revamp its business structure will help the company meet cost-cutting goals.
On Wednesday, Intel (ticker: INTC) announced new details for its shift to an internal-foundry model. Under the plan, the company’s foundry unit will treat Intel’s internal product businesses like any other customer, charging them market-based pricing for chip manufacturing. Intel also said the action will be pivotal in enabling the company to achieve its target of $8 billion to $10 billion in annual expense...
Benchmark analyst Cody Acree is upbeat on Intel’s shift to an internal-foundry model.
Courtesy of Intel
Benchmark believes Intel’s latest move to revamp its business structure will help the company meet cost-cutting goals.
On Wednesday, Intel (ticker: INTC) announced new details for its shift to an internal-foundry model. Under the plan, the company’s foundry unit will treat Intel’s internal product businesses like any other customer, charging them market-based pricing for chip manufacturing. Intel also said the action will be pivotal in enabling the company to achieve its target of $8 billion to $10 billion in annual expense savings by the end of 2025.
A day later, Benchmark analyst Cody Acree reaffirmed his Buy rating on Intel stock with a $39 price target, citing the benefits of the model.
“We believe this new reporting and operating structure will optimize the company’s cost structure as it will change the incentives for leadership, and change the behaviors within each business unit,” he wrote. The “further separation of its foundry manufacturing business provides much-needed transparency.”
In Thursday trading, Intel stock was down 2.3% to $32.16. The stock has fallen 14% over the past 12 months.
Acree says the model should reduce disruptive rush chip orders, lead to more efficient test time planning, and lower the amount of expensive redesigns as Intel product-group executives would directly be responsible for the higher costs on their financial profit-and-loss statements. He is also optimistic the structure will allow Intel to better assess the costs of its decisions among the chip giant’s business groups.
“This new supplier/customer relationship will increase each business units expense visibility and accountability with a direct comparison of the financial performance to its industry peers,” Acree wrote.
Wall Street is generally mixed on Intel stock. According to FactSet, 19% of analysts covering the company have ratings of Buy or the equivalent on Intel stock, while 67% have Hold ratings, and 14% have Sell ratings on the shares.
Write to Tae Kim at tae.kim@barrons.com