In a strategic move to optimize operations, Intel is planning to separate its Network and Edge Group (NEX) into a standalone entity. This decision aligns with the strategy of the new CEO, Lip-Bu Tan, who aims to capitalize on non-core assets. The announcement was initially made through a memo by NEX’s General Manager, Sachin Katti, and was later confirmed by Intel representatives.
The company plans to leverage its status as an anchor investor, continuing to hold a significant stake and benefiting from future growth. This mirrors last year’s move with Altera, which Intel spun off successfully. Altera saw a 51% stake purchased by Silver Lake Partners for $4.46 billion, showcasing the potential benefits of this approach.
Although the valuation and interested buyers for NEX remain undisclosed, it is clear there is a keen interest in finding strategic investors. In 2024, NEX accounted for $5.8 billion of Intel’s total revenue of $53.1 billion. This significant figure underscores the potential appeal to future investors.
The rationale behind this move is part of Tan’s broader strategy to return Intel to a growth trajectory by focusing on core sectors like PC and data center infrastructure. This refocus comes amid the company’s financial challenges, evident from a $2.9 billion net loss in the latest quarterly results. Tan has emphasized the necessity of streamlining and enhancing accountability throughout the organization as a response.
The restructuring effort also involves significant job cuts, with a 15% reduction in workforce, equivalent to approximately 24,000 employees, anticipated by year-end. Additionally, Intel announced that planned foundry projects in Germany and Poland will not proceed, further underlining the company’s commitment to its core business segments.
The decision to proceed with the NEX spin-off is not entirely unexpected; it’s a considered step in a well-thought-out strategy to fortify Intel’s foundation. As Tan stated to his staff, the company must remain “laser-focused” on strengthening its main product portfolio and AI advancements to ensure future success.
