Third Point urges Intel to explore “strategic alternatives”

Third Point, a hedge fund led by Dan Loeb, is urging Intel’s board to appoint an investment advisor to explore “strategic alternatives” after the chipmaker lost market share to TSMC, Samsung and AMD.

Among the considerations that should be stripped of “failed acquisitions,” Loeb wrote in a letter he sent to the Intel board on Tuesday. CNBC saw a copy of the letter. Third Point, known for its business, recently acquired a sizeable $ 1 billion stake in Intel, according to Reuters.

Intel shares rose about 5% after reports of the speech surfaced on Tuesday. Even with Tuesday’s rally, Intel is down 18% in 2020, while AMD, Intel’s biggest rival in the US, has nearly doubled in value, and the S&P 500 is up 15%.

“The loss of manufacturing leadership and other pitfalls have allowed many of the semiconductor competitors to take advantage of TSMC and Samsung’s prowess in process technology and gain significant market share at Intel’s expense,” wrote Loeb. Meanwhile, AMD eroded Intel’s share of “core PC and data center markets”.

Intel said in a statement that it will work with Third Point on its ideas to increase shareholder value.

“Intel welcomes input from all investors regarding enhancing shareholder value. In this spirit, we look forward to partnering with Third Point LLC in their ideas to achieve this goal,” Intel said.

Intel’s financial results were affected in the last quarter by delays in 7nm chips, enabling AMD to get a great start with its competitive chips. Processors are the key to providing improved computing performance and meeting higher speed requirements.

AMD contracts with Taiwan-based TSMC, the world’s largest contract foundry and a company that also makes chips for Apple and Nvidia. Intel CEO Bob Swan Intel said in July that the company was open to outsourcing its manufacturing to keep pace with the current generation of chips.

Loeb noted that Intel’s loss of manufacturing prowess raises national security concerns.

He wrote: “Without immediate change at Intel, we fear that America’s access to leading semiconductor supplies will be eroded, forcing the United States to rely more on geopolitically unstable East Asia to power everything from computers to data centers to critical infrastructure and more. That’s a lot. ” .

Loeb added that Intel should be able to make products that serve huge companies such as Amazon, Apple and Microsoft, which are developing their own chip designs and manufacturing overseas.

He said the company has more recommendations that it would like to make to Intel in private. Third Point has also applied to the Federal Trade Commission for additional shares and preservation of the option to recommend board members in 2021 “if we feel reluctant to work together to address the concerns we raised in this letter.”

CNBC’s Leslie Baker contributed to this report.

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