Analysts at UBS say they are still pining for Intel to separate its product and manufacturing operations into two businesses after the company detailed its IDM 2.0 strategy for its foundry business, its chip manufacturing arm.
On Wednesday, Intel provided investors with a number of updates on its turnaround plans, including its intention to become a chip manufacturing company in competition with Taiwan Semiconductor Manufacturing Company.
The analysts pointed out that the company primarily highlighted the $4 billion to $5 billion savings opportunities that will come from more discrete cost allocation between its product and manufacturing operations.
Intel continues to push back on the idea that the businesses have to be separated to facilitate success in foundry, the analysts noted.
“Though, the new cost segmentation should drive improved efficiency and better product and process velocities,” they wrote.
“On the margin, we thought the event was neutral to maybe slightly disappointing as there was nothing really new.”
However, the analysts said they remain optimistic about the progress Intel has made in terms of its process roadmap and that this was probably the most important debate for the stock.
“At the same time, we see a ‘chicken and egg’ scenario around the foundry strategy as management still shows reticence to consider splitting the business, but customers still tell us this is a necessary precursor for any sizable financial commitments to INTC's foundry offerings.”
The UBS analysts reiterated their ‘Neutral’ rating for Intel. They have a $29 price target on the stock which is currently trading at $32.36.
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