To The Moon

Intel CEO's Turnaround Mirrors Some Moves by Steve Jobs. But Is It Too Late?

$Intel(INTC)$   Chief Executive Pat Gelsinger gave a few important details Thursday about the company's ongoing restructuring that mirrored some of the moves that Steve Jobs made at $Apple(AAPL)$   - but it may take longer to see the results.

Investors have wanted more granular details about where $Intel(INTC)$   was going to cut costs as part of the plan announced last quarter, and Gelsinger said that the chip maker was scaling back its product offerings, something that Jobs also did when he took over Apple in 1996.

"At its current size, it puts too much complexity on our development as well as our customers and OEMs [original equipment manufacturers]," Gelsinger said in response to an analyst's question on the company's earnings call. "You know, how many SKUs they're developing. So we've taken steps to simplify the product line, have fewer SKUs to cover the marketplace, and we're focused on the efficiencies associated with that."

Gelsinger said Intel was streamlining its product focus across its x86 franchise in PCs and in the data center, and reorganizing some business portfolios that will lead to new segment reporting in 2025.

Gelsinger talked about "simplifying" Intel's product lines several times on the call, another term embraced by Jobs as he worked to pare down Apple's bloated line of products in 1997 after he returned to the company that he had co-founded with Steve Wozniak in 1976.

Intel's third quarter was full of charges, ranging from severance packages for employees to impairment charges to write-downs for manufacturing equipment and space Intel bought during the pandemic that cannot be migrated to more advanced technology.

Analysts seemed gratified to hear details, and any talk of streamlining too many confusing product offerings is always a good sign.

But it does raise the question of why it has taken so long for Gelsinger & Co. to initiate these broader moves, nearly three and a half years after his return to Intel in 2021. In August, Dan Hutcheson, vice chairman of TechInsights, told MarketWatch he believed Intel is now getting around to fixing things it should have done at the outset of Gelsinger's arrival.

Still, investors were heartened by the company's progress, as Wall Street often loves a big kitchen-sink quarter, with massive charges and plans to start fresh. Shares of Intel jumped nearly 7% in after-hours trading Thursday, as the outlook for the fourth quarter was slightly better than expected and some underlying businesses - such as data-center chips - showed improvement.

One downcast note, though, was Gelsinger's update that Intel's AI accelerator chip, the Gaudi line, is not going to reach his previous forecast of $500 million in revenue this year. He did not give a new forecast and blamed it on the transition to a new product and the software's complexity.

But much of Intel's future growth is going to come from its manufacturing business, and whether it returns to its prior prowess on that end. The eventual completion and readiness of its next manufacturing node, known as 18a, is still key to its turnaround. Gelsinger said the first factory in Arizona equipped with tools and equipment for 18a is expected to go into volume production in the second half of 2025.

"So overall, you know, we're progressing well," he said. "And we'll be giving you updates as we proceed."

Intel investors right now must either practice the art of patience and truly believe that Gelsinger's strategy will eventually pay off, or bemoan the fact that he did not move as swiftly as he should have when he arrived, with bigger, deeper cuts. Only time will tell who's right.

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