Intel Touts New Divestments to Focus on PC, Data Center Chips

On May 20, Reuters reported, citing people familiar with the matter, that Intel Corporation’s (NASDAQ:INTC) plans to divest its network and edge (NEX) business as it looks to concentrate on areas it has always thrived in. The embattled semiconductor giant’s long-term prospects lay in PC and data center chips, according to new CEO Lip-Bu Tan.

A scientist at a computer station, surrounded by a neural network of artificial intelligence code.

The restructuring drive does not come as a surprise, as Intel controls about 68% of the PC chip market. In addition, the company controls about 55% of the market share in data centers, which provide significant growth opportunities amid the artificial intelligence boom. CEO Lip-Bu Tan does not believe the NEX unit, which makes chips for the telecom equipment market, will help the company’s core strategy. In addition, he wants to exit the segment to stay clear of a market dominated by companies like Broadcom.

Divestments have emerged as Intel’s key strategy, as it aims to enhance focus on the core business. It has already shed a majority stake in its Altera Unit to Silver Lake and, in the process, generated $4.46 billion that it can use to revitalize growth in the PC and data center business units. Renewed focus on the core business has helped strengthen the stock sentiments, with a 5% year-to-date gain. Bank of America analyst Vivek Arya has already reiterated a Hold rating on the stock with a $23 price target.

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