Many of us grew up in the age of the “Intel Inside” marketing campaigns and watched the company dominate the industry for several decades. Some might even remember those little gimmicky turbo buttons computers had to give you a little boost of processing power. In the current age of machine learning, cryptocurrency mining and embedded chips requiring vast amounts of processing power, Intel (INTC) has fallen behind both on the chip design and the manufacturing front.
The company hopes to turn things around and hired the well respected Pat Gelsinger as its CEO in February 201. The move was applauded by the hedge fund Third Point that now holds a large stake in Intel. Mr. Gelsinger has an engineering background with a Masters degree in Engineering from Stanford University and was one of the architects of Intel’s 80486 processor in the late 1980s. He brings the right combination of engineering chops and management experience, having previously served as the CEO of VMWare and the COO of EMC. This winning combination worked out great for AMD (AMD) when it hired Lisa Su as its CEO in 2014.
Founded in 1995 by Dan Loeb, Third Point is a New York based hedge fund with over $17 billion in assets under management. Third Point started a position in Intel in Q4 2020 and by Q2 2021, the position was a top 5 position for the firm with 14 million shares. Third Point asked Intel to focus its attention on regaining manufacturing leadership through its foundry business, where the company has lost significant ground to Taiwan Semiconductor (TSM) in recent years.
Many governments are treating semiconductor companies and semiconductor manufacturing as national security concerns and we have seen several mergers in the semiconductor space either get blocked or go through long multi-country regulatory approvals. The U.S. Department of Defense (DOD) launched a new program to use the U.S.-based commercial semiconductor foundry ecosystem to fabricate products required for critical Department of Defense systems. Intel has decided to invest nearly $20 billion in two factories in Arizona to meet demand from U.S. DOD and other commercial customers. Insiders of Intel probably see a brighter future for the company as five different insiders, including the CEO, made open market purchases as you can read below. The company has been growing its dividend for seven years in a row even as it has been buying back its stock. If Mr. Gelsinger can reverse the market share erosion and start growing the top line, Intel would be a worthwhile company to consider for long-term investors.
Welcome to edition 591 of Insider Weekends. Insider buying decreased significantly last week with insiders purchasing $65.52 million of stock purchased compared to $101.39 million in the week prior. Selling also decreased to $1.11 billion compared to $1.88 billion in the week prior.