Shareholders Sue Intel for Concealing Facts About Chip Business
On Wednesday 7 this week, shareholders sued Intel for concealing the problems that resulted in poor performance, suspension of dividends, and job cuts. Reuters reported that these problems caused the market valuation to drop by over $32 billion in one day following the Intel stock plunge.
The lawsuit was filed in a federal court in San Francisco. The shareholders want legal action taken against Intel, Patrick Gelsinger, who is the Chief Executive, and David Zinsner, the Chief Financial Officer.
False Statements
Intel shareholders claim that the company blindsided them when it stated that its chip-making business was ‘floundering’ on August 1. With this announcement, the company spent billions of dollars even as revenues dipped.
Shareholders also say that Intel’s misleading statements about the business and its production capabilities inflated share prices between January 25 and August 1. The lawsuit came just days after the company announced Intel job cuts that would see 15% of its workforce relieved of their duties.
Restructuring Strategy
Intel plans to cut 15,000 jobs as part of its multi-year restructuring strategy that is aimed at saving $10 billion in 2025. Last week, the chip manufacturing giant announced plans to suspend dividend payments for shareholders starting quarter four of this year.
In quarter two of this year, the company posted a $1.61 billion net loss even as its revenue dipped by 1% to $12.83 billion.
Tough Competition
Intel has been struggling to put up with stiff competition from rival chip companies. Some of its competitors include Nvidia, Taiwan’s TSMC, Samsung, and Advanced Micro Devices (AMD). In June this year, the company unveiled new Intel AI chips in a bid to stay ahead of its competitors.
But even with the new chips, the company has not leveraged the growth in AI fully to remain competitive. Intel’s stock prices dropped by 26% on August 2 to trade at $21.48. This happened one day after the chip manufacturer released its quarter two results, announced impending job losses, and revealed plans to suspend dividends.
On Wednesday, share prices dropped by 3.6% to trade at $18.99. Cumulatively, Intel shares have lost 34.6% of their value since the company released its second quarter results.
