Intel CEO Pat Gelsinger has tasked his team with finding new cost savings as the chip giant tries to battle back from a challenging second quarter while also rebuilding the company for the future.
"This is a time for a bit of austerity," Gelsinger told Yahoo Finance on Friday (video above). "We had stuff we created over the last decade that needed to be cleaned up. It helps drive a more accelerated pace to the transformation we have under way."
Gelsinger told investors on the company's second quarter conference call last week he has exited six businesses since taking over as CEO in 2021. More recently, the company has exited its drone business.
In total, these six exits have freed up $1.5 billion for Intel to invest elsewhere in its business, Gelsinger said. The company also remains on track to spin-off its self-driving tech business Mobileye later this year, a move that should free up additional resources.
These business exits come at a critical time for Intel as it invests aggressively in its budding foundry business and in new chips to regain market share from the likes of AMD. They also arrive as Intel's struggles deepened in the second quarter due to product delays and flagging consumer demand for PCs.
Here's how Intel performed versus Wall Street estimates for the second quarter:
2Q Adjusted Sales: $15.32 billion vs. $17.96 billion
2Q Adjusted Gross Margin: 44.8% vs. 51%
2Q Adjusted Operating Margin: 9.2% vs. 18.7%
2Q Adjusted EPS: $0.29 vs. $0.69
3Q Adjusted Sales: $15 billion to $16 billion vs. $18.7 billion
3Q Adjusted EPS: $0.35 vs. $0.82
Full Year Adjusted Sales: $65 billion to $68 billion vs. $75 billion
Full Year Adjusted EPS: $2.30 vs. $3.39
Shares of Intel fell more than 8% in Friday's session. Seven Wall Street firms slashed their ratings on Intel's stock, owing to skepticism around a fourth quarter business recovery.
Gelsinger told Yahoo Finance Live last week that the business was "at the bottom," with trends standing to improve from there as product delays ease and seasonal forces pick-up and spur demand.
"Looking forward, we believe Intel's weak report will likely further solidify the company as a 'show me story' until progress on manufacturing technology, product competitiveness and financial returns become more apparent to investors," Deutsche Bank analyst Ross Seymore wrote in a note to clients. "In our opinion, the first instance for Intel to rebuild credibility in its strategy will likely come in 4Q22, as the company’s updated guidance implies a sizable ramp in revenue and margins that is likely to be viewed as optimistic until delivered."
Seymore reiterated a Hold rating on Intel shares but cut the price target to $38 from $45.