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Technology World

Intel cuts dividend to lowest since 2007 to save cash

Intel Corp on Wednesday cut its dividend payout to its lowest in 16 years and decided to scale back big investments to save cash amid slowing demand for its chips used in personal computers and data centers.

Once a leading chipmaker, Intel is now racing to catch up with rivals such as Taiwan Semiconductor Manufacturing Company Ltd on manufacturing technology, while looking to grow its foundry business at the cost of lower margins.

Chief Executive Pat Gelsinger said Intel would hold back on major investments to the tune of tens of billions of dollars on new manufacturing equipment and facilities as it grows its foundry business.

“As the macro conditions continued to deteriorate in Q4 our free cash flow fell below our guard bands and in this environment we just came to the conclusion that the highest dividend payer shouldn’t also be the highest capital investor,” he told analysts.

The company, which reaffirmed its first-quarter forecast issued in January, said it will cut the dividend to 50 cents per share annually or $0.125 per share quarterly, a drop of 66% from its last payout.

“While painful, this was a necessary step in ensuring capital is available for their manufacturing plan,” Credit Suisse analyst Chris Caso said.

Demand for Intel’s chips have cooled after two years of strong growth during the pandemic-led remote work, leading the chipmaker to warn in January that it would lose money in the first quarter.

Intel has committed to reduce $3 billion in costs this year with an aim to save between $8 and $10 billion by the end of 2025.

Gelsinger now expects net capex intensity, or the amount spent to generate a dollar in revenue, to be in the “low 30s” this year compared with its prior expectation of 35%.

Intel shares, which lost about half of its value last year, were up about 3% in early trading.

Source : Reuters



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