Intel has sold its 1.18 million share stake in British chip designer Arm Holdings, raising nearly $147 million.

This move is part of a broader restructuring strategy as the company grapples with financial challenges and intensified competition in the semiconductor industry.

Why did Intel divest its stake in Arm?

Intel’s decision to divest from Arm comes during a challenging period for the company. With cash and cash equivalents at $11.3 billion and liabilities around $32 billion by the end of June, the sale represents an effort to shore up its balance sheet.

The divestment is a component of CEO Pat Gelsinger’s ambitious restructuring plan, described as “the most substantial restructuring of Intel since the memory microprocessor transition four decades ago.”

At the beginning of August, Intel announced a $10 billion cost-reduction initiative that includes cutting approximately 15,000 jobs, eliminating its fiscal fourth-quarter dividend, and slashing capital expenditures.

This comes in the wake of disappointing quarterly results and a light forecast for the current period, which led to the steepest single-day drop in Intel’s stock price in 50 years, falling by 26%.

Intel’s challenges in the AI-driven market

Intel’s difficulties have been exacerbated by its attempts to accelerate the production of Core Ultra PC chips designed to manage AI workloads.

The AI boom has heightened competition within the semiconductor industry, with rivals like AMD and Qualcomm racing to launch AI-focused chips, following Nvidia’s significant success in this sector.

Despite these efforts, Intel has struggled to keep pace with other semiconductor giants.

The company is also attempting to revitalise its foundry business to recapture market share lost to Taiwan’s TSMC and South Korea’s Samsung, which dominate the global chip manufacturing market.

Arm’s strong performance

Arm Holdings, in which Japan’s SoftBank Group holds a majority stake, has seen its shares perform strongly since its initial public offering (IPO) last September.

Arm’s shares have risen by nearly 65% year to date, benefiting SoftBank and contributing to the Japanese conglomerate’s overall portfolio value.

In contrast, Intel’s stock has plummeted by nearly 60% this year, reflecting the company’s ongoing struggles.

However, Intel shares saw a slight uptick in after-hours trading following the news of the sale, according to data from LSEG.

Way forward for Intel

Intel’s sale of its stake in Arm signifies a shift in focus as the company seeks to navigate through a period of significant financial pressure and restructuring.

The move may provide some relief to Intel’s balance sheet, but the company still faces considerable challenges ahead as it competes with rapidly advancing rivals in the AI-driven semiconductor market.

The divestment from Arm is just one of several strategic decisions Intel has made recently, all aimed at positioning itself more favourably in an increasingly competitive industry.

The effectiveness of these efforts, however, remains to be seen as Intel continues to grapple with both internal and external pressures.

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