Intel facing several 'fundamental challenges' beyond layoff plans
As reports that widescale job cuts are in the works at Intel (NASDAQ:INTC), chip-industry analysts have begun sussing out the semiconductor giant's plans and their potential impact on the company's overall business operations.
Vivek Arya, of Bank of America Securities, said Wednesday that the reported 20% cuts coming to Intel's (INTC) marketing and sales staff, along with plans for greater separation between the company's design and manufacturing teams, are necessary, but "would be insufficient to change our fundamental concerns" around Intel's (INTC) core strategic, competitive and financial risks.
On Tuesday, Bloomberg initially reported that the cuts to Intel's (INTC) nearly 114,000-employee base could be announced in conjunction with the company's third-quarter results, which are set to come out on October 27 after the close of trading.
Arya said that despite Intel's (INTC) efforts to reduce costs, the company can't ignore several "fundamental disadvantages" that will remain regarding however many people work at the semiconductor kingpin.
Those issues include what Arya said were "subscale manufacturing" that is behind that of Taiwan Semiconductor (TSM), and a high reliance on consumer PCs, which recently showed a decline in worldwide shipments due to issues with supplies and a slowdown in demand.
Arya has been skeptical regarding Intel (INTC) for some time, and has an underperform rating, or the equivalent of sell, as well as a $30-a-share price target on the company's stock.
Despite a general negative view about Intel (INTC), Arya did say there was a "bright side" to the company's future. Arya said that with the U.S. looking to build out its domestic semiconductor foundries as an alternate to Asian manufacturers, "Intel is the only U.S.-based supplier that could even get close to that goal over the next several years."
Intel (INTC) Chief Executive Pat Gelsinger said this week that the company will implement its own internal foundry model for its own chips, and those of its customers.