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Intel was so short of money that it didn’t even let go of $147 million.

On Tuesday, Intel reported in a regulatory filing that it no longer holds the 1.18 million shares of chip technology provider Arm holdings it held three months ago. Based on the average price of Arm shares over the same period ($124.34), the sale will raise about $147 million for Intel.

Ten days ago, Intel released its worst performance report in its 56-year history. In the second quarter, the company's revenue was $12.83 billion, down 1% year-on-year; its net loss was $1.61 billion, compared with a net profit of $1.48 billion in the same period last year. The poor performance caused its stock price to fall by nearly one-third, and its market value evaporated by more than $30 billion overnight.

Not only did Intel's stock price plummet, but it also had limited funds in its account. As of the end of June, Intel's cash and cash equivalents were $11.29 billion, and total current liabilities were approximately $32 billion. Therefore, Intel did not even let go of the $147 million in equity income, and even so, this equity investment still had a net loss of $120 million.

In addition to trying to recover equity investment, Intel has also launched a $10 billion cost-cutting plan that will lay off more than 15% of its employees. Intel even said it would suspend dividends from the fourth quarter of 2024 and reduce full-year capital expenditures by more than 20%.Intel has been paying dividends since 1992, and this is the first time it has suspended dividends in the past 32 years.

What happened to the former chip overlord?

At the earnings conference earlier this month, Intel said that the poor performance was mainly affected by the decline in data center and AI businesses, wafer capacity adjustments and other non-operating expenses. Compared with a loss of $381 million in the first quarter of this year, Intel's losses in the second quarter increased by $1.2 billion. Intel expects third-quarter revenue to be between $12.5 billion and $13.5 billion, a year-on-year decrease of 4.9% to 11.2%, which is also significantly lower than analysts' expectations, and there is no sign of improvement at all.

Faced with poor performance, Kissinger, who has been at the helm of Intel since 2021, has always appeared very calm.

At the earnings conference, he defended the company's performance. Gelsinger admitted that the second quarter financial report was not good, but the company had made milestone progress in product and process technology, but the current market challenges were greater than expected. He said that Intel would continue to accelerate the IDM 2.0 transformation and take more decisive actions. The Intel 18A to be launched next year will significantly improve the company's performance.

But obviously, the market doesn't buy it.

On August 2, local time, Intel's maximum intraday decline was close to 30%, and it closed down 26.2%, evaporating $32.37 billion in a single day, the largest decline since 1982. Many Wall Street institutions collectively downgraded Intel's rating, and S&P directly put Intel on the negative credit watch list.

Since 2021, Intel's stock price has fallen by nearly 70%, while the S&P 500 index has risen by 39% during the same period.The overall surge in the U.S. stock market could not lift this former "blue giant".

Currently, Intel's market value is around $84 billion, which is not only not even a fraction of Nvidia's, but also less than 40% of AMD's. Worse, Intel's market value is lower than the actual value of its facilities and other assets listed on its balance sheet, which is the first time in 43 years, enough to show investors' pessimistic expectations.

However, this stock price turmoil did not seem to cause the expected public opinion storm, and even Intel officials did not issue a special statement to reassure investors. It was like a sudden rainstorm, it did happen, but after the rain stopped, everything continued as planned.

At the beginning of his tenure, Kissinger admitted that it would not be easy to lead the "blue giant" to a revival. He wrote in a letter to employees within the company: "I have no illusions that the road ahead of us will be smooth sailing... There will be more difficult days in the future."

As an old technology company, Intel has seen too many changes in Silicon Valley and has more experience in dealing with turbulence than its competitors.

Founded in 1968, Intel has witnessed the most glorious era of American industry. One of its founders, Robert Noyce, is the inventor of commercial integrated circuits and is known as the "Father of Silicon Valley." Another founder, Gordon Moore, even proposed a prophecy that influenced the transformation of information technology - Moore's Law.

In the 1980s, with the development of information technology, Intel transformed into a microprocessor company. In a series of PC industry revolutions that swept the world, Intel's microprocessors played an irreplaceable role, and the "Intel" logo also entered millions of homes as PCs became more popular around the world.

Perhaps because its PC business was too successful, Intel failed to keep up with the pace of the smartphone era. Its refusal to accept Apple's request to supply processors for the iPhone out of concern for profit margins was a fatal strategic mistake, which gave Qualcomm and MediaTek the opportunity to make a breakthrough in the mobile processor market.

For a long time, Intel insisted on the IDM model, that is, it handled everything from design, production, packaging to sales by itself. This made it miss a lot of opportunities in the chip foundry business. TSMC, which specializes in downstream production links, took the lead in breaking through the 7nm process technology.

In 2021, as the company's first chief technology officer, Kissinger returned to Intel as CEO after 12 years away, shouldering the important task of leading Intel out of its period of confusion.

After his return, Kissinger quickly proposed the IDM 2.0 concept, which means that Intel will continue to produce its own chips while also providing foundry services to third-party chip design companies, becoming the world's second largest chip foundry company in 2030. At the same time, the company will hand over some chips to its peers for production to achieve process complementation.

He believes that Intel sacrificed efficiency in order to demonstrate its leadership in the IDM 1.0 era, and now it needs to play to its strengths and compete with differentiation. "Intel is the only company that has both depth and breadth in software, chips and platforms, packaging, and large-scale manufacturing process technology... We will use the IDM 2.0 strategy to design the best products and manufacture them in the best way."

Drastic changes require real money support.

The rise of protectionism and the pandemic have accelerated the pace of the US government's support for the repatriation of manufacturing. The Biden administration signed a $280 billion "chip bill" to encourage companies to develop and manufacture chips in the United States. As the largest semiconductor manufacturer in the United States, Intel has naturally become the focus of attention, from policies to funds, from tax incentives to Department of Defense procurement orders...According to statistics, Intel has received a total of US$8.5 billion in funds and US$11 billion in loans.

However, Intel entered the chip foundry field too late, making its efforts still difficult in the short term.

The document shows that the independent Intel foundry business segment will have revenue of $18.9 billion in 2023, a year-on-year decrease of 31%, and an operating loss of up to $7 billion. Kissinger admitted that 2024 will be the year with the worst operating loss for the company's chip manufacturing business, and it is expected that operating profit and loss will not be achieved until around 2027.

Of course, Intel is not going to panic. No matter how slow the progress is or how loud the doubts are in the capital market, the US government will not sit idly by as chip manufacturing is a core industry related to future development. Intel still has bargaining chips to fight back.

Looking back, Intel has always been a company at the forefront of the industry and driving technological development.

Intel is at a critical period of transformation. Although the outside world is dissatisfied with its performance, Wall Street has always been positive about Kissinger's plan to reshape Intel's technological foundation and is willing to give Intel time to adjust. The current criticism is more about the company's efficiency and cost control.

Although office workers want to have a work-life balance, the technology industry is changing rapidly, and efficiency means success or failure. For many years, Intel has often been criticized as the "retirement home of the IT industry". The treatment is acceptable, but it is difficult to retain motivated and enterprising talents. Kissinger also admitted: "Our costs are too high, the profit margins are low, and we have not fully benefited from powerful trends such as AI."

The document shows that by the end of 2023, Intel has 124,800 employees. After the second quarter earnings conference, Kissinger announced that the company's largest layoff in history would be completed by the end of the year, involving 15,000 people. It is reported that Intel has launched an "optimized retirement plan" internally, providing an application procedure for employees who voluntarily resign.

In addition to regaining lost ground, Intel is also realizing open source through new concepts in its areas of strength.

In September 2023, Kissinger first proposed the concept of "AI PC" at the Innovation Conference, emphasizing that PC is the best medium to bring AI technology from the laboratory to the consumer end. AI will fundamentally reshape the PC user experience and unleash productivity and creativity.

Kissinger did not come up with a brand new disruptive product, but after his packaging, the currently popular AI and the PC industry, which had been in a state of sluggish growth for a long time, were suddenly closely linked together, providing a landing scenario, which immediately ignited the consumer electronics market and became the focus of various companies.

From this perspective, Kissinger can also be called an "advertising master."

The financial report shows that since December 2023, Intel's AI PC shipments have exceeded 15 million units, and are expected to exceed 40 million units by the end of the year. According to Canalys's estimates, global AI PC shipments will reach 48 million units in 2024. Based on this calculation, Intel has an absolute leading position in the AI ​​PC market.

During the conference call, Intel also repeatedly emphasized its confidence in the prospects of AI PCs. "We are in a leading position in the AI ​​PC category, and the ecosystem is healthy... We expect revenue in the fourth quarter to be at the high end, and the enterprise market will also enter a renewal cycle."

In August, Intel announced that the first batch of AI PC client processor Panther Lake and server processor Clearwater Forest samples built on the Intel 18A process node are now powered on and can successfully start the operating system.

Having gone through multiple industry development cycles, Intel may be more experienced in facing changes than its competitors. The technological foundation accumulated over the years is Intel's foundation and also the confidence to enter the AI ​​field.

But Intel can no longer waste the opportunity and must take more impactful actions, otherwise it is not impossible for its name to appear on the long list of "fallen overlords" in the technology industry.