Why Intel is spinning off its telecom chip division
What's the story
Intel is spinning off its Network and Edge group, a major player in the telecom chip industry. The move comes as part of new CEO Lip-Bu Tan's strategy to streamline operations by shedding the non-core assets and reducing costs. The firm plans to be an anchor investor in this standalone business while also seeking outside capital for it.
Performance
Network and Edge group generated $5.8B revenue in 2024
The Network and Edge group, which makes processors for telecom equipment, generated an impressive $5.8 billion in revenue in 2024. This accounted for nearly 11% of Intel's total sales. The decision to spin off this division was first reported by CRN and comes after rumors of a potential buyer earlier this year.
Previous spin-off
Intel's past steps
The strategy to spin off the Network and Edge group is similar to Intel's earlier decision to separate its RealSense stereoscopic imaging technology business. The move was made during former CEO Pat Gelsinger's tenure and the standalone firm started with $50 million in venture funding. Tan's restructuring plan also includes scaling back major investments and cutting workforce numbers at Intel.
Financial challenges
Shares fell 9% yesterday
Intel's shares fell 9% yesterday after the company warned of quitting chip manufacturing if it fails to secure a major customer. The tech giant also reported an unexpected second-quarter adjusted loss and predicted a larger-than-expected loss in Q3.