The chip maker said the massive dividend decrease represents the company’s deliberate approach to capital allocation, which in turn will put the firm in the best position to create long-term value. That includes making “critical investments” as Intel looks to transform its business operations “during this period of macroeconomic uncertainty.”
“Prudent allocation of our owners’ capital is important to enable our IDM 2.0 strategy and sustain our momentum as we rebuild our execution engine,” Intel CEO Pat Gelsinger said in a statement. “We remain on track to deliver five nodes in four years and continue to expand the IFS (Intel Foundry Services) customer base.”
Combined with the “difficult steps to previously taken to reduce headcount” (layoffs) and lower operating costs, Intel says it’s on the path to $8 billion to $10 billion in annualized savings by the end of 2025. Intel is also temporarily cutting compensation and rewards programs for employees and executives, as well as the board.
“This is in addition to the exit of seven non-core businesses since early 2021, as the company continues to sharpen its focus and drive a best-in-class operating structure,” Intel says.
He inherited a company that had missed launch targets, particularly with getting to 10 nanometers, and yielded ground to both AMD and TSMC (which manufactures chips for AMD, among others). He’s also had the added challenge of navigating a global pandemic that disrupted every level of the supply chain.
One of Gelsinger’s first order of business was to put Intel’s IDM 2.0 strategy into motion. This consists of three main goals towards reestablishing chip dominance: 1) Expanding its internal network of chip fabs, 2) Making use of third-party fabs when necessary, and 3) Establishing Intel Foundry Services (IFS) to service external customers across the globe.
“While we will continue to prudently manage cash and capital outlays in the near term, we are setting the foundation for significant operating leverage and free cash flow growth when we emerge from this period of outsized investments,” Intel CFO David Zinsner said in a statement.