Intel slashes dividends by two-thirds in wake of falling revenue

Thursday 23 February 2023 12:59 pm

Intel has been forced to slash its dividends with its shareholders by nearly two-thirds as the tech giant attempts to hold on to funds in the wake of falling revenue.

According to a report in the Financial Times, the chipmaker is now set to give a small quarterly payout of 12.5 cents down from the previous level of 36.5 cents. 

The decision will help the firm save about $4bn and comes as Intel is ramping up investment into its chip manufacturing operations in an attempt to “make up lost ground on rivals Taiwan Semiconductor Manufacturing Company and Samsung”.

Shares in the chipmaker, which have fallen over 40 per cent in the last year, closed down two per cent on the news yesterday.

Intel boss Pat Gelsinger said the decision was made to conserve cash in the business, with a tough economic climate already leading Intel to predict revenue in this quarter to fall 40 per cent compared to the same period last year. 

“Our free cash flow fell below our guard bands. We came to the conclusion that the highest dividend payer shouldn’t be the highest capital investor at this period in time,” Gelsinger said in an analyst call. 

It comes as the group has faced a number of internal challenges, including the resignation of its EMEA regional leader Frank Scheper after just one year.

Additionally, the group revealed in October that it was set to lay off thousands of staff members in an attempt to fight off a slowdown in sales. 

Last summer, the company warned that 2022 sales would be about $11bn lower than previously expected as computer processor sales slowed. 

“After aggressively reducing costs, cutting jobs and sweeping the business for other savings, cutting the dividend is a disappointment but longer term is a prudent step to preserve cash for investments to aimed at growing the business,” Susannah Streeter, market analyst at Hargreaves Lansdown, told City A.M.

“Intel may still be the  largest chipmaker in the US, and the world’s biggest manufacturer of CPUs for servers and PCs, but the pandemic sales uplift has shrunk back and Intel risks slipping further behind if it doesn’t keep up with the intense interest in the AI market,” she explained.

“It’s already partnered up with Nvidia to develop high performance computers used for simulations across a wide ranges of industries. But management clearly believe extra firepower is needed to become a serious challenger.’’

Intel has been approached for comment.