To revitalize its business, Intel said that its foundry unit will produce some unique artificial intelligence chips for Amazon Web Services.
This news sent shares of the chipmaker soaring before the market opened on Tuesday.
CEO Pat Gelsinger announced late on Monday that Intel will use its foundry business to develop an AI fabric processor for Amazon’s cloud services division.
This division is failing and Gelsinger said it will eventually become a subsidiary of Intel.
“A subsidiary structure will yield significant advantages,” Gelsinger declared.
It gives our vendors and external foundry clients a greater sense of independence and isolation from the rest of Intel.
Laptops 1000Most importantly, it provides us with future freedom to assess independent funding sources and maximize development and shareholder value generation by optimizing each company’s capital structure.
The next natural move, according to JP Morgan’s Harlan Sur, is to turn the foundry business into a subsidiary.
“This move should not be viewed as a surprise as we believe it is a natural progression towards better transparency and decision making/efficiencies,” the analyst stated in a client note.
Over the next few years, Sur thinks the change may result in a spin-out of the company.
For the proposed subsidiary, an independent directorship will be included on the board.
Gelsinger also gave a summary of Intel’s cost-cutting initiatives. The chip company is more than halfway to its personnel reduction target of about 15,000 by the end of the year, according to the executive, thanks to voluntary early retirement and separation offers.
He continued that the impacted staff will be informed in the middle of October, and “difficult decisions” will still need to be taken.
By the end of the year, Intel intends to cut back on or sell around two-thirds of its real estate holdings worldwide.
Intel Corp.’s stock increased by almost 7% in premarket trading.
