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The move comes as part of new CEO Lip-Bu Tan’s strategy to monetise “non-core assets”
Intel is set to spin off its networking and communications business, Network and Edge Group (NEX), as a standalone entity.
The plan was initially revealed in a memo to customers from NEX’s general manager Sachin Katti but was later confirmed by Intel spokespeople.
“We plan to establish key elements of our Networking and Communications business as a stand-alone company and we have begun the process of identifying strategic investors,” said Intel in an official statement. “Like Altera, we will remain an anchor investor enabling us to benefit from future upside as we position the business for future growth.”
Altera, Intel’s field programmable gate array business, was spun off last year, with the move being viewed as one of the company’s first efforts to monetise its non-core business assets. The decision quickly proved successful, with Intel selling a 51% stake in Altera to US-based private equity firm Silver Lake Partners for $4.46 billion in March. It seems likely that Intel is aiming to replicate this model with NEX.
Intel will remain an anchor investor in the spun off business, with Katti noting that the company had already begun “identifying additional strategic and capital partners to support the growth and development of the new company”.
Exactly how NEX would be valued, and the identity of potential buyers is so far unclear. In 2024, NEX contributed $5.8 billion of Intel’s total revenue of $53.1 billion.
A specific timeline for the spin off was not announced.
The decision to spin off the networking unit should come as little surprise. Intel’s new CEO Lip-Bu Tan, who took over the business from previous CEO Patrick Gelsinger in March, had reportedly been considering the spin off since May as part of an overarching strategy to return the company to growth.
Tan’ aim is to refocus the company around its core segments, PC and data centre infrastructure.
In the company’s latest quarterly results, released last week, Intel booked a $2.9 billion net loss.
In a note to staff following the company’s quarterly results, Tan emphasised that the business would need to make significant changes moving forward.
“I know the past few months have not been easy. We are making hard but necessary decisions to streamline the organisation, drive greater efficiency and increase accountability at every level of the company,” he said, adding that the company needed to be “laser-focused on strengthening our core product portfolio our AI roadmap.”
Unsurprisingly, this streamlining effort also includes job cuts, with Tan reiterating plans to reduce the company’s headcount by 15% (roughly 24,000 employees) by the end of the year.
In addition, Intel says it will not proceed with previously planned foundry projects in Germany and Poland.
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