Justin Sullivan
Intel (NASDAQ:INTC) has staked much of its future on the success of its foundry business, as it looks to become a viable competitor to Taiwan Semiconductor (TSM) and Samsung (OTCPK:SSNLF). And while investors have become increasingly optimistic about the company’s advancements in foundry, artificial intelligence and other areas, there may be more upside to come.
Even if it’s not all together.
Northland Capital Markets analyst Gus Richard, who has an outperform rating on Intel (INTC), believes the Pat Gelsinger-led company could ultimately separately into five separate companies — Mobileye, Altera, foundry, IMS Nanofabrication and products — with the sum of the parts being worth $68 per share.
At that valuation, Intel (INTC) would be worth roughly 50% higher than where shares ended on Friday.
“These individual companies are likely to be worth more than the combined entity,” Richard wrote. “The question, in our view, is the timing of each spin-off.”
Mobileye and Altera
Richard believes the remaining value of Intel’s (INTC) position in Mobileye (MBLY), of which it spun off a portion in October 2022, could be worth as much as $30B.
Its Programmable Solutions Group (previously known as Altera), could be worth $12B, or roughly five times trailing 12 month revenue.
In October, Intel announced its intent to separate its PSG operations into a standalone operation, effective January 1 in an effort to continue to simplify its larger business.
The PSG group, which is responsible for Intel’s push into high-performance communications and data center applications, will be led by Sandra Rivera when it becomes an independent company. Currently, Rivera is the general manager of Intel’s Data Center and AI group.
Foundry, foundry, foundry
The third part would be the standalone foundry, which Richard said could wind up being the second-largest in the world, behind Taiwan Semiconductor (TSM).
“Intel will likely be the only viable alternative to TSMC at the leading edge, particularly for high-performance applications such as AI Asics, CPUs, GPUs, and FPGAs,” Richard wrote. He estimated it had internal manufacturing revenue this year of roughly $20B, so at five times revenue — a similar multiple for Taiwan Semiconductor, GlobalFoundries (GFS) and United Microelectronics (UMC) — the foundry business could be worth $100B.
Richard talked up Intel’s 18A foundry process technology, which has led to several customer wins, as well as the 18A PDK 0.9, which he said is “an essential milestone in [Intel’s] evolution as a foundry.”
He also said packaging is starting to become a differentiator, with Intel having added two packaging customers in the third-quarter and has six more in the pipeline.
IMS Nano
Additionally, the Santa Clara, Calif.-based Intel has sold roughly 30% of its IMS Nanofabrication business to two partners — Bain Capital in June and Taiwan Semiconductor in September — at a valuation of about $4.3B.
Product turn around?
Lastly, Intel’s (INTC) products business looks to be turning around, especially if PCs rebound in 2024 and the company stabilizes its market share in both PCs and servers.
“We expect INTC to regain process technology leadership in [2025], and as a result, market share in servers and PCs should, at a minimum, stabilize,” Richard wrote, noting that 2025 is likely to be a “strong year” for PCs, spurred in part by the infusion of AI.
Richard noted Intel’s (INTC) products — excluding foundry, Mobileye and Altera — generated $49B in revenue this year. As a stand-alone fabless company, it could be worth as much as $147B, or roughly three times revenue, not including the $90B in property, plant and equipment on the balance sheet.
