Wall Street Breakfast Podcast: Intel Mulls Foundry Split

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Intel (INTC) said to be weighing options including foundry split as red ink mounts. (00:23) SecureWorks (SCWX) gains on report Dell (DELL) exploring sale of cybersecurity firm. (01:56) Verizon (VZ) and Skylo to launch satellite messaging service. (03:03)

This is an abridged transcript of the podcast.

Intel (NASDAQ:INTC) is exploring options such as splitting its foundry business and potentially scrapping factory projects.

People familiar with the matter told Bloomberg this information as Intel struggles to turn around its business amid mounting losses.

The company’s longtime bankers Morgan Stanley (MS) and Goldman Sachs (GS) are providing advice on potential options, which may also include M&A.

Discussions are still in early stages, and the options being considered will likely be presented during a board meeting in September.

A split or sale of Intel’s (INTC) chip foundry unit would mark a major U-turn for CEO Pat Gelsinger, who thought the division would restore the company’s standing among chipmakers. But the sources cited in the report expect Intel to make a smaller move first, like holding off on some expansion plans.

Intel’s (INTC) latest earnings and guidance widely missed expectations, while it will cut jobs and suspend its dividend to lower costs. The news sparked a major selloff on August 2, marking the stock’s worst day in over 50 years.

Gelsinger at a conference on Thursday admitted that it’s been a difficult few weeks. “… we’ve been working hard to address the issues and at earnings we were determined to lay out a clear view of where we were, but also some of the next steps we needed to address. And obviously, the market didn’t respond positively.”

“And we respect some of the skepticism that we’ve received from the market. I, my leadership team, the company, we believe we’re up for the challenge.”

SecureWorks (NASDAQ:SCWX) jumped 20% on Thursday after a report that majority-owner Dell Technologies (DELL) is again exploring a potential sale of the cybersecurity firm after earlier attempts failed.

Dell (DELL) has hired Morgan Stanley and Piper Sandler to solicit interest from possible buyers, according to a Reuters report on Thursday, which cited people familiar with the matter. Possible buyers include private equity firms.

Dell, which owns a 79.2% stake in SecureWorks (SCWX), is not guaranteed to sell the firm and Dell may decide to retain ownership. Dell also controls 97.4% of the company’s voting stock through dual class shares.

Reuters first reported in December 2019 that Dell was exploring a sale of SecureWorks (SCWX). Dell purchased SecureWorks for $612 million. It currently has a market value of about $640 million.

Dell told Seeking Alpha it has a policy of not commenting on rumor or speculation.

Verizon (NYSE:VZ) has partnered with Skylo, a non-terrestrial network communications company, to launch a commercial direct-to-device messaging service for Verizon customers.

Starting this fall, the company said customers on certain smartphones can access emergency messaging and location sharing even when a terrestrial cellular network is not available.

Verizon said it will offer the ability to text anywhere via satellite for customers with select devices next year.

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Catalyst watch:

• Additions and deletions to the MSCI equity indexes will be made at the close of the market. Flutter Entertainment (FLUT), Embraer (ERJ), Ibotta (IBTA), and Reddit (RDDT) are notable companies being added to various MSCI indexes.

• The HSR review period by the Federal Trade Commission for Darden Restaurants’ (DRI) acquisition of Chuy’s Holdings (CHUY) is set to expire.

Now let’s take a look at the markets as of 6 am. Ahead of the opening bell today, Dow, S&P and Nasdaq futures are in the green. Crude oil is flat at $75/barrel. Bitcoin is down 0.1% at $59,000.

In the world markets, the FTSE 100 is up 0.2% and the DAX is up 0.1%.

The biggest movers for the day premarket: MongoDB (NASDAQ:MDB) is up 14% following a strong Q2 earnings report, which highlighted the benefits of robust new workload acquisition and better-than-expected Atlas consumption trends.

On today’s economic calendar:

• 8:30 am Personal Income and Outlays

• 10:00 am Consumer Sentiment

• 1:00 pm Baker-Hughes Rig Count

And finally, it is Labor Day weekend so that means Monday is a holiday and therefore we will not publish a podcast on that day. If you’re looking for a Labor Day preview check out today’s edition of the Wall Street Breakfast newsletter. See you Tuesday!