Intel faces lawsuit and accusations of inflating its stock price by sharing ‘materially false or misleading statements’

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What you need to know

  • Intel shareholders have filed a lawsuit against the chipmaker claiming that Intel hid negative information about Intel Foundry services.
  • Intel reported a $1.6 billion net loss in its most recent quarterly report and announced 15,000 layoffs as a cost-cutting measure.
  • In a single day, Intel’s market cap fell by $32 billion.

As a seasoned tech enthusiast with years of investing experience under my belt, I must say that Intel’s current predicament is a stark reminder of the unpredictable nature of the tech industry and the stock market. I remember when Intel was the undisputed leader in the semiconductor industry, and its name was synonymous with cutting-edge technology.

2021 has been a challenging year for Intel, as their difficulties persist. Following the announcement of job cuts affecting 15,000 employees and ongoing controversy surrounding the performance of their 13th and 14th generation CPUs, shareholders have now brought forth a lawsuit against the company. This legal action alleges that Intel concealed problems which ultimately contributed to a staggering $32 billion decrease in the company’s market value within a single day.

According to the lawsuit, I observed that the company made significant inaccuracies or exaggerations about its operations and production capacities between January 25th and August 1st, which led to an artificially high stock value.

In a lawsuit filed in the federal court of San Francisco on August 7, 2024, Intel CEO Patrick Gelsinger and CFO David Zinsner are the named defendants. The complaint stems from allegations that Intel’s foundry services are struggling, as claimed by Intel shareholders, who were reportedly taken aback by this development. (Reuters report)

On August 1, 2024, Intel decided to reduce its workforce by 15,000 employees as part of a plan aimed at cutting costs by approximately $10 billion before the end of 2025.

“Gelsinger stated that our earnings haven’t increased as much as projected, and we haven’t fully taken advantage of emerging technologies such as AI. Our expenses are excessive, and our profit margins are meager. To tackle both issues, more decisive measures are required, especially considering the challenging financial situation in the second half of 2024, which is now expected to be tougher than initially anticipated.”

Intel’s Foundry service, launched in 2021 with the daring concept of manufacturing chips for competitors and other businesses, has encountered difficulties. In 2023 alone, it reported a substantial loss of approximately $7 billion. This underperformance has left shareholders taken aback, as the service seems to have fallen short of initial expectations.

After the August 1 announcement of Intel’s financial results, the company’s stock price significantly dropped. Intel reported a quarterly loss of approximately $1.61 billion, which was largely attributed to a dramatic 99% decrease in revenue. In response, Intel announced plans to reduce costs by decreasing its workforce by over 15%. Additionally, the company halted its dividend payments starting from Q4 2024. At one point, the value of Intel on the stock market fell by an astounding $32 billion in just a day.

Intel faces the challenge of dealing with multiple legal disputes, recovering from revenue losses, and readying its Lunar Lake mobile CPUs for launch. These upcoming processors are designed to rival Qualcomm’s Snapdragon X series and AMD’s latest Ryzen AI 300 Series mobile processors in the market.

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2024-08-08 18:09