Intel To Face Challenging 2021 Amid Activist Investor's Call For Change, Morgan Stanely Says.
09:05 AM EST, 12/30/2020 (MT Newswires) -- Intel (INTC) is set to face a challenging 2021, with concerns in the manufacturing of its new processors amid an activist investor recently calling for change, Morgan Stanley said Wednesday.
Recently, Third Point Chief Executive Daniel Loeb wrote a letter to Intel Chairman Omar Ishrak, asking the company to evaluate strategic alternatives and make changes within the company, Reuters reported. Intel then said it will work with the activist investor to enhance shareholder value.
In a note to clients, Morgan Stanley analysts said Intel's management and board have shown that they can objectively be open to feedback, which could be helpful especially with a relatively new chairman of the board.
However, the bigger question, the analysts said, is how much fabrication capacity Intel should outsource for manufacturing its 7 nm processor. The analysts have said that numerous delays in the manufacturing technology for both the 10 nm and 7 nm processors have been a "significant impediment" to the company. Outsourcing manufacturing to Taiwan Semiconductor Manufacturing would likely be accretive to Intel's margins and cash flows, Morgan Stanley said.
Another challenge is the lack of visible technology decision-makers in the company. The analysts said the departure of chief CPU designer Jim Keller and Chief Engineering Officer Murthy Renduchintala has affected investor and customer confidence.
"Investor confidence is important, but customer's confidence in the roadmap is even more important and Intel needs someone in the executive suite that can talk to those issues, in addition to strong financial management," according to the note.
Morgan Stanley reiterated its equal-weight rating on the stock, with a price target of $60.
Price: 49.09, Change: -0.30, Percent Change: -0.61
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