Intel Going Private: Former Board Members Weigh In
- This article argues that Intel is currently structured in a way that hinders its potential and is detrimental to both US national interests and shareholder value.
- * The Conglomerate Discount: Intel suffers from the typical problems of a conglomerate, where the combined value of its parts is less than the value of those parts...
- In essence, the article advocates for a radical restructuring of Intel, driven by government intervention and private investment, to create a competitive US foundry and unlock significant value...
Summary of the Argument: Restructuring Intel for National & Shareholder benefit
This article argues that Intel is currently structured in a way that hinders its potential and is detrimental to both US national interests and shareholder value. The core argument is that Intel should be disaggregated – broken up into separate entities – and that the US government, alongside a consortium of major tech design firms, should play a key role in this restructuring.
Here’s a breakdown of the key points:
* The Conglomerate Discount: Intel suffers from the typical problems of a conglomerate, where the combined value of its parts is less than the value of those parts operating independently. The example of General Electric is used to illustrate this point.
* past Glory, Present Struggles: Intel’s historical success was built on vertical integration (design and manufacturing). However, this model is no longer effective, and attempts to revive it are failing.
* The Proposed Solution:
* Government Acquisition of Foundry: The US government, backed by companies like Nvidia, Microsoft, Apple, Amazon, Qualcomm, broadcom, and Google, should buy out all of Intel’s stock. This would allow the creation of a dedicated, US-based foundry – a critical need for national security and reducing reliance on TSMC.
* Divestiture of Design Businesses: The government/consortium should then find new owners for Intel’s design businesses, including those focused on servers, personal computers, and autonomous driving (Mobileye).the venture capital arm should also be sold.
* Value Unlocked: The author estimates significant value is currently “locked” within Intel’s conglomerate structure:
* Foundry: Book value $70B (but needs $100B investment)
* PC Microprocessor Design: $100B
* Server/Data center Design: $100B
* Mobileye: $15B
* Venture Portfolio: (Value not explicitly stated)
* Difficulty of Internal Change: The author believes Intel’s current management and board are unable to execute this necessary restructuring due to the pressures of being a public company and the operational complexities involved.
In essence, the article advocates for a radical restructuring of Intel, driven by government intervention and private investment, to create a competitive US foundry and unlock significant value from its various business units.