Third Point urges Intel to explore ‘strategic alternatives’

Intel CEO Robert Swan speaks at the Rakuten Optimism event in Yokohama, Japan, on July 31, 2019.

Tomohiro Ohsumi | Getty Images

Third Point, the hedge fund led by Dan Loeb, is appealing to Intel’s board to appoint an investment adviser to explore ‘strategic alternatives’ after the disc maker lost market share to TSMC, Samsung and AMD.

Among the considerations should be the sale of ‘failed acquisitions’, Loeb wrote in a letter to Intel’s board on Tuesday. CNBC viewed a copy of the letter. Third Point, known for its activism, recently took a significant stake in $ 1 billion, according to Reuters.

Shares of Intel rose about 5% after reports of the letter appeared Tuesday. Even with Tuesday’s rally, Intel fell 18% in 2020, while AMD, Intel’s leading US competitor, nearly doubled and the S&P 500 climbed 15%.

“The loss of manufacturing leadership and other flaws have enabled several semiconductor competitors to leverage TSMCs and Samsung’s process technology expertise and gain significant market share at Intel’s expense,” Loeb wrote. Meanwhile, AMD has eaten away at Intel’s share of its “core computer and data center CPU markets”.

In a statement, Intel said it would work with Third Point on its ideas to increase shareholder value.

“Intel Corporation welcomes the input of all investors regarding improved shareholder value. In spirit, we look forward to engaging with Third Point LLC on their ideas regarding the purpose,” Intel said in a statement.

Intel’s financial results were hurt last quarter by the delay of 7 – nanometer chips, which enables AMD to gain a dramatic edge over its rival chips. The processors are the key to improved computer performance and to meet the demands for faster speeds.

AMD contracts with Taiwan-based TSMC, the largest contract foundry in the world, and a company that also makes chips for Apple and Nvidia. Intel CEO Bob Swan Intel said in July that the company was open to outsourcing its manufacturing to keep pace with the current generation of chips.

Loeb indicated that Intel’s loss of manufacturing prowess posed national security problems.

“Without immediate change at Intel, we fear that America’s access to leading semiconductor supplies will erode, forcing the US to rely more heavily on geopolitically unstable East Asia to power everything from computers to data centers to critical infrastructure and more, he wrote. .

Loeb added that Intel should be able to manufacture products that serve massive companies such as Amazon, Apple and Microsoft, which develop their own chip design and have it manufactured overseas.

He said the firm has more recommendations he wants to make privately to Intel. Third Point also filed with the Federal Trade Commission to acquire incremental shares and retain the option to recommend board members in 2021 “should we feel reluctant to work together to address the issues we have raised in this letter. to speak. “

– Leslie Picker of CNBC contributed to this report.

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