Friday, August 9th 2024
Intel Faces Shareholder Lawsuit Amid Financial Turmoil and Layoffs, Company Misled Investors
According to a recent report from Reuters, tech giant Intel is facing a significant legal challenge as shareholders file a lawsuit following a dramatic plunge in the company's stock price. The legal action comes from Intel's recent announcement of dividend suspensions and plans to lay off over 15,000 employees. The semiconductor behemoth saw its market value plummet by a staggering $32 billion in a single day, leaving investors reeling. The Construction Laborers Pension Trust of Greater St. Louis has initiated a proposed class action suit, naming Intel, CEO Pat Gelsinger, and CFO David Zinsner as defendants. The plaintiffs allege that the company made misleading statements about its business operations and manufacturing capabilities, artificially inflating its stock price between January 25 and August 1.
Intel's financial woes stem from underperforming contract foundry operations and 1% drop in revenue during the second quarter of 2024. While it may seem miniscule, declining revenue is paired with a negative 15.3% operating margin, resulting in a net loss of $1.61 billion. The company's August 1 announcement caught many shareholders off guard, prompting accusations of inadequate disclosure and transparency. This lawsuit is just one of several legal battles Intel is currently strangled in. The company is also locked in a patent dispute with R2 Semiconductor across multiple European countries, centering on voltage regulation technology. While Intel has secured a victory in the UK, it faces ongoing litigation in Germany, France, and Italy. Adding to Intel's troubles, a separate class action lawsuit is being explored on behalf of customers who purchased potentially faulty 13th and 14th-generation processors. The company also canceled its September 2024 Innovation event, citing poor financials, without any words on Arrow Lake or Lunar Lake. While the cancelation of events is sad, it is necessary to get financials back on track, and product launches should continue as usual.
Sources:
Reuters, via Tom's Hardware
Intel's financial woes stem from underperforming contract foundry operations and 1% drop in revenue during the second quarter of 2024. While it may seem miniscule, declining revenue is paired with a negative 15.3% operating margin, resulting in a net loss of $1.61 billion. The company's August 1 announcement caught many shareholders off guard, prompting accusations of inadequate disclosure and transparency. This lawsuit is just one of several legal battles Intel is currently strangled in. The company is also locked in a patent dispute with R2 Semiconductor across multiple European countries, centering on voltage regulation technology. While Intel has secured a victory in the UK, it faces ongoing litigation in Germany, France, and Italy. Adding to Intel's troubles, a separate class action lawsuit is being explored on behalf of customers who purchased potentially faulty 13th and 14th-generation processors. The company also canceled its September 2024 Innovation event, citing poor financials, without any words on Arrow Lake or Lunar Lake. While the cancelation of events is sad, it is necessary to get financials back on track, and product launches should continue as usual.
50 Comments on Intel Faces Shareholder Lawsuit Amid Financial Turmoil and Layoffs, Company Misled Investors
But now, the leading in fabs is TSMC and Intel struggle to catch up. The fab division can no longer save the ass of the uArch division.
They will need to suffer way more before it get better.
As for AMD with Zen 5, i think it meet their goals. Its just desktop users werent part of it. The new uArch seems to have really good performance in scientific and datacenter workload and the power efficiency will be killer on desktop.
And i think that AMD is smart to go this way. The threat for them is no longer Intel. Its all the other ARM vendor that are efficient and could grab market share from them. It just suck for us.
Poor c-level decisions is the reason Intel is bleeding money. I don't see how cancelling an event would make much of a difference.
Im not saying the LA convention center can host all of the people that would otherwise attend Intel’s summits. (Though given what iv seen I’m willing to bet it could) I’m just saying there is definitely poor financial planning involved if hosting a public event even has the chance to topple your company.
It's not just the savings in convention center fees, booth rentals, merchandise (logoed t-shirt) orders. Many tradeshows -- especially developer focused ones -- require a significant commitment in employee resources, particularly engineers for developer events.
Remember that budget & headcount cuts are typically assigned to divisions, so each division management has to decide who/what to cut. In some cases, it's not feasible to simply downscale an event and turn a developer conference into a meet-and-greet at a local craft brewery.
In the case of a cancelled corporate event like a tradeshow, there are some real savings. Maybe there are some deposits or up-front fees that can't be recouped but certainly you can save a bunch of money by not putting people in airplanes and hotel rooms. That $30 rideshare from the hotel to and from the restaurant is going to be expensed back to the company as well as the meal itself. What is the true cost of 5 days of travel, room & board AND a week of lost productivity from a senior engineer?
Again, all of this is crystal clear to anyone who has worked a corporate job at a Fortune 500 company.
The shareholder lawsuit was automatic. Anyone with ten neurons could have predicted it the moment Intel released their earnings statement.
Classy.
Don't you worry. There will be more shareholder lawsuits, not just this particular trust adminstrator.
The issue isn't whether or not stocks go up or down. It's whether or not Intel properly disclosed its challenges. Missing your revenue targets by a couple hundred basis points is disappointing but still within the realm of reason.
The massive miss is the problem. The point is that Intel probably had lots of warning about a massive revenue miss and they didn't communicate it to the investors (both actual and potential) in a timely manner.
Buying on a dip makes sense when there are signals that a turnaround is probable. There is nothing in Intel's statements or general industry sentiment that indicates any sort of near term reversal for Intel.
Buying on Nvidia's dip makes far more sense. They are minting money and their guidance is pretty strong. If you understand Nvidia's business, you'll know that Fortune 500 companies buying AI accelerators don't just send a junior IT staffer to Best Buy to pick up some cards. These projects come out of an annual budget and generally require many months to reach full operational status. It's not like buying a new keyboard and plugging it into your PC.
There is nothing about Intel that says they are going to right the ship anytime soon. The fact that Client Computing is still their biggest business is also another harbinger. This is not a business that grows by leaps and bounds.
By contrast, Nvidia's Datacenter business, a couple of years ago was neck-and-neck with their Gaming business. The latter has grown modestly but their Datacenter business exploded, it's now about 5-6x larger than Gaming.
Moreover, there are plenty of other signs that are probably reasonable predictors of Nvidia's short term prospects. TSMC has indicated strong July shipments. There are other chip technology firms (packaging for one) that have announced exceptional revenue and indicated strong guidance. Nvidia's products aren't just a die from a wafer, there's a lot of other stuff around it. And when partners like SuperMicro also offer strong guidance, that's another data point.
Investors need to look at the big picture if they want better performance from their portfolio.
I agree with bta’s take www.techpowerup.com/forums/threads/intel-postpones-innovation-2024-event-to-2025-no-word-on-arrow-lake-launch.325413/#post-5306391
That it would likely be inappropriate to host something like that given the pressure they are under.
If a corporation as big as Intel actually needed to cancel a public showcase to attempt to save its company then the financials are even worse then they are publicly showing. It would already be too late.
speculation: This temporary rise in stock price bears an ill omen, that the stock will plummet further after this minuscule rise within a month.