Intel's Workforce Reduction and Organizational Restructuring Not Enough, Fears Analyst

BofA analyst Vivek Arya maintained an Underperform on Intel Corp INTC and a $30 price target.
Two separate media reports suggested INTC’s plan to reduce its marketing and sales headcount by 20% and create greater decision-making separation between its design and manufacturing teams.
Both steps were necessary but insufficient to change his fundamental concerns around core strategic, competitive and financial risks, Arya mentioned in his Wednesday note titled “First take on headcount reductions, design/manufacturing “separation.”
The media reports of potential cost cuts and Advanced Micro Devices, Inc’s AMD recent PC-related warning suggest greater downside risk to INTC’s Q4 and CY23 estimates.
However, under his current estimates, a 20% cut to CY23E marketing and sales expense could expand CY23 net income by $1.3 billion, helping INTC satisfy its ~$6 billion dividend commitment.
Despite the company’s efforts to reduce costs, INTC’s fundamental disadvantages remained.
Though INTC continues to pursue its IDM strategy, he believes today’s news is the first step in what is an inevitable break-up of design and manufacturing.
His price target is based on the low-end multiple of computing peers, which he views as appropriate given manufacturing uncertainties and risks of the new foundry strategy.
Barclays analyst Blayne Curtis cut the price target on Intel to $30 from $35 and kept an Underweight.
September notebook volumes were slightly worse, but the outlook for Q4 “moves much lower,” Curtis noted.
He said that the PC market looks to be nearing a bottom, with 2022 close to pre-pandemic levels.
Price Action: INTC shares traded lower by 0.68% at $24.87 on the last check Wednesday.

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