Foundry Bet and Asset Sales Signal New Path

Recent developments at Intel Corporation NASDAQ: INTC suggest a quickening pace in its strategic overhaul under new CEO Lip-Bu Tan. Reports emerging around May 20, 2025, indicate the semiconductor sector giant may be actively exploring a sale of its Networking and Edge (NEX) business unit.

This news closely followed comments from Intel’s Chief Financial Officer, Dave Zinsner, around May 13th, who publicly reaffirmed the company’s confidence in its Intel Foundry Services (IFS) division, reiterating a target for the unit to achieve break-even status by 2027. 

Taken together, these signals point towards a concerted effort by Tan, who assumed leadership in March 2025, to streamline the company’s vast operations, sharpen its focus on core high-growth areas, and solidify the foundations for its ambitious long-term manufacturing and product strategies.

These moves unfold against a backdrop of continued market scrutiny, inviting a closer look at whether these deliberate strategic actions could pave the way for a more robust turnaround than currently reflected in investor sentiment.

Trimming the Fat? The Rationale Behind Intel’s Potential Sale

The exploration of a sale for Intel’s Networking and Edge (NEX) unit represents a significant potential step in CEO Lip-Bu Tan’s efforts to simplify the company and hone its strategic priorities. The NEX division, which encompasses a range of hardware and software platforms for network infrastructure and edge computing, generated substantial revenue of $5.8 billion in 2024, accompanied by an operating income of $931 million. 

However, its growth trajectory has been modest in the recent past, with 2024 revenue only slightly up from 2023 and notably down from its $8.4 billion peak in 2022. Intel had already signaled a shift in how NEX fits into its broader structure by integrating its financial reporting into the PC and Data Center segments starting in the first quarter of 2025.

A divestiture of NEX would align squarely with Tan’s stated intentions to concentrate Intel’s considerable resources on its foundational PC and Data Center chip businesses, alongside the critically important, though currently capital-intensive, Intel Foundry Services (IFS). The logic is compelling from several angles. Firstly, it would allow for greater management bandwidth to be dedicated to these core areas, which face intense competition and require flawless execution. 

Secondly, a sale could yield a significant capital infusion. While no official valuation for NEX has been discussed, unlocking capital from a multi-billion dollar revenue business could substantially strengthen Intel’s balance sheet, providing more firepower for the hefty investments required in advanced manufacturing for IFS or research and development in next-generation CPUs and AI accelerators. This approach mirrors the strategy seen with the announced sale of a 51% stake in the Altera FPGA business to Silver Lake, suggesting a clear pattern of monetizing assets deemed non-central to the primary mission.

Furthermore, the networking market is notoriously competitive, with established players like Broadcom NASDAQ: AVGO holding significant sway, potentially making a dedicated focus by a specialized entity more viable than within Intel’s broader conglomerate structure.

Intel’s Foundry Path Gains Clarity

Recent statements from Intel’s leadership reinforce confidence in the long-term viability of its Intel Foundry Services (IFS) division. CFO Dave Zinsner stated on May 13 that IFS is expected to reach break-even status by 2027. He also emphasized the strategic importance of domestic manufacturing projects like the Ohio One plant within the broader IFS plan, despite adjustments to its operational ramp-up timeline into the early 2030s. 

These affirmations align with CEO Lip-Bu Tan’s internal restructuring efforts, including layoffs aimed at creating a more agile, engineering-centric organization. Tan’s proactive customer engagement is a key strategy to build trust and tailor IFS offerings. Establishing IFS as a credible, customer-focused manufacturer is central to Intel’s long-term growth.

Seeking Value in Intel’s Evolving Strategy

Despite these strategic initiatives aimed at streamlining operations and fortifying long-term growth engines, Intel’s stock price continues to face a challenging market environment. This prevailing skepticism appears heavily influenced by Intel’s weak financial guidance for the second quarter of 2025, which projected breakeven non-GAAP earnings per share (EPS), and the continued operating losses from Intel Foundry Services, which amounted to $2.3 billion in the first quarter alone.  

However, from a contrarian or value investing perspective, a disconnect might be perceived between these near-term headwinds and the potential long-term benefits of Intel’s strategic realignment. Valuation metrics such as a Price-to-Book ratio (P/B) of approximately 0.88 indicate that the company’s market value is less than the accounting value of its assets, a situation that can sometimes signal undervaluation. 

If CEO Lip-Bu Tan’s efforts to create a more focused and efficient Intel succeed, and if IFS can indeed reach its 2027 break-even target and capture a meaningful share of the foundry market, the current stock price might not fully reflect this future earnings power. The argument could be made that the market is heavily discounting these strategic shifts, creating a potential opportunity for investors with a longer time horizon who believe in the ultimate success of the turnaround. 

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