https://www.marketwatch.com/story/intels-potential-for-massive-cash-burn-amid-foundry-push-has-this-analyst-feeling-concerned-69c4320
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ntel’s potential for ‘massive cash burn’ amid foundry push has this analyst feeling concerned
Published: June 26, 2023 at 8:45 a.m. ET
By Emily Bary
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An analyst remains worried about ‘the massive capital expenditures required for the expansion of its foundry operations’
Intel has “viable cost savings opportunities,” but an analyst says it will take time to realize all of them. ROBYN BECK/AGENCE FRANCE-PRESSE/GETTY IMAGES
Referenced Symbols INTC -1.55%
Intel Corp. is realigning its business to give investors greater financial visibility into its foundry ambitions, but an analyst says that even the company’s management realizes the new approach to reporting “will not be a panacea for its bloated cost structure.”
That’s the view of Gimme Credit analyst Dave Novosel, who continued to take a negative stance on Intel Corp.’s INTC, -1.55% bonds in a Monday note to clients. Intel wants to make chips for other companies, but Novosel was worried about the costs associated with this move.
His chief fear concerned “the massive capital expenditures required for the expansion of its foundry operations,” especially since Intel has already been burning through cash. He anticipated that Intel will see more cash burn this year than the $15 billion it racked up in 2022.
“Revenue is eroding dramatically, while margins are deteriorating,” Novosel wrote, while reiterating his underperform rating on the chip giant’s bonds. “Hefty capital spending associated with the foundry model and $5 billion-plus for the Tower Semiconductor acquisition will likely lead to a massive cash burn. Leverage is soaring with the additional debt” of $15 billion over the past three quarters.
Novosel acknowledged that Intel is trying to trim costs, including by accelerating its ramp rates and charging for samples, yet he wrote that he sees hurdles ahead.
“While these appear to be viable cost savings opportunities, the full benefit will not be realized until the end of 2025 or more than two and a half years,” he wrote. “Meanwhile, Intel is facing the challenge of moving through five nodes in four years. That is an ambitious goal, particularly given some of the product rollout mishaps in recent years.”
Novosel’s comments come after Intel held an investor day last week, during which it provided additional information about the foundry business.
Intel’s stock was on track to rise Monday, up 0.9% in premarket action.
About the Author
Emily Bary
Emily Bary is a MarketWatch reporter based in New York.
Unable to read post. Would someone paste?