Intel Corporation (INTC.US) confirms the divestiture of its network communication business and anchors investment model replication following the path of Altera.

According to an internal memo, Intel Corporation (INTC.US) has revealed plans to spin off its Network and Edge Business Unit (NEX) and seek external investment for the business unit. The memo, written by NEX Business Unit leader Sachin Katti, has been confirmed by an Intel Corporation spokesperson. Katti, who took over the NEX Business Unit at the beginning of 2023, was appointed Chief Technology and AI Officer by CEO Pat Gelsinger in April of this year, responsible for developing the chip giant's AI strategy. In the memo, Katti stated that Intel Corporation had "internally announced" on Thursday the "transformation of the NEX business into an independent company," aiming to create a "cutting-edge silicon solutions provider focused on key communication, enterprise networking, and Ethernet connectivity infrastructure." The Intel Corporation spokesperson confirmed in a statement, "We plan to separate the core segments of the network and communications business to establish a standalone company and have initiated the strategic investor selection process. Similar to the Altera transaction, Intel Corporation will retain an anchor investor position, sharing in future profits while driving business growth." On the day this spin-off plan was announced, the semiconductor giant also disclosed several reform measures under the leadership of CEO Pat Gelsinger, including a global workforce reduction of 15% and a more conservative strategy for the foundry business. "We are fully strengthening our core product portfolio and AI technology roadmap to enhance customer service capabilities," emphasized Pat Gelsinger in the statement. Katti did not provide a specific timeline for the spin-off. Since last September, the business unit has focused on network and communication products after transferring the edge computing business to the Client Computing Business Unit and integrating photonics solutions into the Data Center Business Unit. According to Katti, Intel Corporation will follow past spin-off cases by introducing external investors while retaining ownership in the new company. "Intel Corporation will continue to be a core investor, but we are actively seeking more strategic and capital partners to help the new company grow and strengthen," promised Katti, stating that this reorganization is "based on the fundamental goal of enhancing customer service" and that the existing support system will remain seamlessly integrated while empowering NEX to "expand into new business areas more efficiently." This executive anticipates that the independent company supported by Intel Corporation will accelerate innovation and investment to drive customer strategies and product planning more agilely. Since taking over as CEO in March, Pat Gelsinger has consistently indicated plans to divest non-core strategic assets. Reports in May indicated that Intel Corporation was considering selling the NEX business unit. While not directly addressing the NEX spin-off in Thursday's earnings call, Pat Gelsinger mentioned a plan to divest "non-core assets," including reducing Mobileye (MBLY.US) shareholdings earlier this month. He revealed that the majority ownership (51%) of Altera's programmable chip business is expected to be sold to Silver Lake Capital by the end of September, with Intel Corporation retaining 49% ownership. "While continuing to focus on core business and strategy, I will continue to evaluate other optimization opportunities," stated Pat Gelsinger during the earnings call.