money Third point urges intel to explore deal options
Hedge fund Third Point urges Intel to explore deal options. Yahoo Finance's Brian Sozzi, Myles Udland and Julie Hyman discuss.
Video Transcript
JULIE HYMAN: Shares of Intel, as Jared Blikre just told us, down a little bit today, after bouncing yesterday. And that's after Dan Loeb's Third Point sent a letter to Intel's management saying it was looking for some changes. According to Reuters, Third Point's amassed about a billion dollar stake in Intel. The shares, by the way, are down this year. And they've gone kind of nowhere over the last couple of years.
One of the things that Loeb is talking about the company potentially doing is maybe outsourcing some more of its production. The company does a lot of its production of its chips in-house. And according to some critics, that has made it sort of more slow in some cases to do the custom chips for its clients. Also, the stock has been hammered to some degree by increasing competition from other companies like Advanced Micro Devices.
Now Intel did respond to a Third Point and said Intel Corporation welcomes input from all investors regarding enhanced shareholder value. In that spirit, we look forward to engaging with Third Point LLC on their ideas toward that goal. Third Point has made these sorts of efforts before with varying degrees of success. Brian Sozzi, what do you think of this effort here on Intel?
BRIAN SOZZI: Well, Julie, it's been a tough year for Intel, tough 12 to 18 months. To your point, stock down about 18% year to date, and NASDAQ's up 43%. So quite the gap there. Seeing a lot of other tech stocks work a lot better. But in many respects, they, Intel has lost the narrative. You see investors, they clamor for AMD they clamor for Nvidia, and rightfully so. Those companies are changing the game in many respects in the chip industry. But I think Loeb will have an open ear very soon at Intel.
And I'm looking at this board of directors here. On the board of Intel, you have Andrew Wilson. He's the CEO of Electronic Arts. He has done deals in the past. Not a stranger to doing deals. You have HP's former CEO, Dion Weisler on this board. He helped split these companies, HP and HPE apart. And then you have James Goetz. He's on the board of Palo Alto Networks, a major player in the tech space. He's also currently a partner at Sequoia Capital.
So you have folks on this board that might be receptive to Loeb to potentially spinning off or divesting certain underperforming businesses and raising shareholder value. And you have CEO Bob Swan, a longtime Intel executive who's certainly no slouch at the company.
MYLES UDLAND: You know, Sozzi, something that really stood out to me in Dan Loeb's letter to Intel is, he's calling out the company's inability to retain its best talent. And I think about it on the backdrop of that story we saw from PayPal CEO Dan Schulman, the other day, saying that they polled the financial health of their employees and basically found they were underpaying everybody. So they gave everybody raises, and then everybody was happy. Gave them better health benefits, so on and so forth.
And I think it's going to be very interesting to see in the next decade whether that theme that had been building from let's say 2015 through 2019 of labor, especially knowledge workers, gaining a lot more bargaining power over their employers. You know, labor kind of flexing on capitol a bit, as it were. Interested to see how that trend continues in the decade ahead, because again, Loeb is here saying traditionally, employee costs are seen as shareholder unfriendly.
But if you had maybe just given someone I don't know, I actually don't know what it takes for an engineer, $500,000 in stock options, a million in stock options? But to Intel, that's nothing. And he's saying if you had done that for some of these folks, maybe they'd still be there. Maybe you wouldn't have punted your entire lead to some competitors, AMD among them, Taiwan Semi, another one that gets called out in Loeb's letter here.
BRIAN SOZZI: Real quickly, I do want to add too, Intel is not, it's not a Sears situation here. This is Intel is still one of the leaders in the tech industry. It's just that they have perhaps lost the lead in narrative to an AMD and Nvidia. They throw off a ton of cash. This is not a company in a financial death spiral. So it just might need a little tweaking to get the stock price, just tweaking the operationals and the procedures to get the stock working again. And maybe Loeb is the catalyst.
JULIE HYMAN: Yeah, and still to your point, also, I mean, it's a huge company. It's about a $200 billion market cap, so this is a big ship to try to turn or even if you're talking about spinning off parts of it. But we will keep an eye on it as we head into 2021.
