The abrupt departure of Intel CEO Pat Gelsinger offers a fresh opportunity for the troubled company to consider potential deal options, including scenarios that he rejected during his time running the chip maker.

The board has discussed a range of possibilities in recent months, such as private equity transactions and even a split of Intel’s factory and product design businesses. But Gelsinger was opposed to breaking up the company, focusing instead on his plan to restore Intel’s technological edge and become a made-to-order manufacturer for outside clients.

With Gelsinger leaving this week — following pressure from the board — there’s a chance to reset the conversation. Morgan Stanley and Goldman Sachs Group have been helping the company ponder its options and may find a more receptive audience in new management.

It’s also an opportunity for suitors to take another look at acquiring some or all of the business. Qualcomm expressed some interest in a transaction before, though nothing got very far.

“This leadership change increases the probability of divestitures,” Bloomberg Intelligence analysts Kunjan Sobhani and Oscar Hernandez Tejada said in a note on Monday. “Gelsinger was firmly against breaking up the company, but the prolonged and expensive turnaround has tested shareholder patience, potentially forcing Intel to reconsider.”

Intel’s board evaluated a number of scenarios during a critical meeting in September, including the idea of a breakup. The discussions followed an abysmal earnings report the previous month, when Intel posted a surprise loss and a disappointing sales forecast.

But Intel pushed forward with less radical changes, including a pause in the construction of plants in Poland and Germany. The company also is slashing roughly 15 000 jobs and suspended its decades-old dividend — part of attempts to conserve cash and keep Gelsinger’s turnaround plan on track.

If the new CEO goes ahead with a bigger shake-up, these are deal ideas that Intel could revisit:

1. Splitting factory and product divisions

This would involve fully separating Intel’s factory business from the more profitable unit that develops products. Under Gelsinger, the company has been expanding its manufacturing operations to become a foundry — a maker of components for outside customers. The idea is to eventually compete with Taiwan’s TSMC, a pioneer of the foundry approach.

But Intel has only announced a few big clients for its foundry operations, and production of high-end chips isn’t large enough to make the endeavour profitable. Perhaps worse, sales have been sliding — an ominous sign for a business pushing into a big new industry segment.

Read: How Intel spurned OpenAI – and lost the AI chip race

Though Intel might be able to find a suitor for its product division, the foundry operation would be a harder sell. The largest US chip foundry is GlobalFoundries, which has its own struggles. That company lacks cash or experience in running the type of manufacturing that Intel’s factories were built for.

It’s also unclear if a new Intel CEO — or the rest of the board — would be ready to dismantle a company that once ruled the chip industry. And the move would complicate Intel’s ability to get US$7.9-billion in federal grants under the US Chips and Science Act, a law aimed at revitalising domestic chip production.

A representative for Santa Clara, California-based Intel declined to comment.

2. Lure a suitor like Qualcomm

Qualcomm recently considered an Intel acquisition, but its interest has cooled. The complexities associated with acquiring all of Intel made a deal less attractive, people familiar with the matter said.

But Qualcomm could consider buying pieces of Intel, such as the product business. Like much of the chip industry, Qualcomm doesn’t manufacture its own semiconductors. Instead, it designs chips and relies on partners like TSMC to handle production. That’s why it’s unlikely to want Intel’s factory operations.

Broadcom previously assessed whether to pursue an Intel deal, but it didn’t move ahead with talks. When Broadcom CEO Hock Tan was asked if he might seek a chip acquisition, he said his hands were full integrating the purchase of VMware.

Any big chip merger also would face regulatory hurdles around the world — something both Qualcomm and Broadcom know well. Broadcom scuttled an attempt to buy Qualcomm after the deal was blocked by US President Donald Trump in 2018.

3. Selling Altera

Intel’s Altera unit, acquired in 2015 for about $17-billion, makes chips that can be reprogrammed for different uses after they’re manufactured. Intel has held negotiations about selling a portion of the business to financial investors, a potential step towards an initial public offering for the unit.

Buyout firms such as Francisco Partners, Bain Capital and Silver Lake Management have been studying offers to invest in Altera. Last month, though, news emerged that Lattice Semiconductor was considering making an offer for all of Altera. Lattice is working with advisers and is seeking a private equity backer as it explores a potential bid, people familiar with the process said.

Whether or not such a deal moves forward, the idea of unloading the entirety of Altera could have fresh momentum under a new Intel CEO.

4. An Apollo investment

Apollo offered to make a multibillion-dollar investment in Intel earlier this year. The New York-based firm indicated that it would be willing to make an equity-like investment of as much as $5-billion. But negotiations didn’t lead to an announcement.

Apollo has an existing relationship with Intel. The firm agreed in June to buy a stake in a venture that controls an Intel chip plant in Ireland for $11-billion. That makes it more likely that the partners will engage in further talks.

5. A Mobileye transaction

Intel acquired Mobileye, a maker of self-driving technology, in 2017. Though the business went public in 2022, Intel still owns most of the company. That situation has the potential to change under a new CEO.

In September, Intel said it isn’t “currently” planning to divest its majority stake in Mobileye. But it has been reported that the chip maker was contemplating options for its 88% holding.

Intel could offload some of the stake in the public market or via a sale to a third party, people familiar with the discussions said. In any case, it’s unlikely to be a winning investment for Intel, which paid about $15-billion for Mobileye. The company currently has a market value of $14.1-billion. — Ryan Gould and Ian King, (c) 2024 Bloomberg LP

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