Intel’s Restructuring Signals a Bold New Chapter
Intel is undergoing a significant transformation under its new CEO, Lip-Bu Tan, who aims to revitalize the iconic chipmaker by focusing on core competencies and shedding non-essential divisions. The latest move involves spinning off its networking and communications division into a stand-alone entity—marking another major step in the company’s strategic overhaul.
A Focused Strategy Under New Leadership
Lip-Bu Tan, who took over as CEO earlier this year, is leading Intel through a business realignment aimed at improving profitability and long-term viability. His plan centers around three core pillars: divesting non-core businesses, reducing operational costs, and streamlining manufacturing strategies. This aggressive approach seeks to reverse years of missteps that left Intel lagging behind competitors in chip development and AI innovation.
Networking Unit Slated for Separation
Intel confirmed on Friday that it has begun the process of spinning off its networking and communications unit—formerly known as the Network and Edge (NEX) division—into an independent company. The company is currently identifying potential investors for the new spin-off, aiming to position it for future growth while maintaining some financial stake.
Intel stated via email, “Like Altera, we will remain an anchor investor enabling us to benefit from future upside as we position the business for future growth.” The reference to Altera is notable, as Intel recently sold a majority stake in that programmable chip business to Silver Lake at a valuation of $8.75 billion.
A Familiar Playbook: Altera’s Blueprint
The strategy of retaining a minority stake while divesting operational control mirrors Intel’s recent Altera deal. The decision to offload Altera was seen as a way to monetize underperforming assets while keeping skin in the game. Intel originally acquired Altera in 2015 for nearly double the valuation it received from Silver Lake in 2025, highlighting a sobering re-evaluation of past M&A decisions.
This approach allows Intel to focus resources on its central businesses—namely high-performance chip manufacturing and AI integration—while offloading segments that no longer align with its future.
Financial Struggles Fuel Transformation
Intel’s restructuring comes amid mounting financial pressure. On Friday, its stock tumbled by 9% after the company issued a stark warning: it may exit chip manufacturing altogether if it cannot secure a major client. The announcement was accompanied by disappointing Q2 results, including a surprise adjusted loss and a forecast of a larger-than-expected loss in the upcoming quarter.
The company’s struggles have been years in the making, largely attributed to high capital expenditures and a manufacturing strategy that failed to keep pace with the likes of AMD, Nvidia, and TSMC. Tan’s leadership aims to pivot Intel away from these high-risk bets and toward a leaner, more competitive model.
NEX Revenue Still Significant
Although Intel no longer reports NEX as a separate segment—folding it into its data center and PC group earlier this year—public filings show that the networking unit generated $5.8 billion in revenue in 2024. That represents approximately 11% of Intel’s total sales, suggesting that while the unit may no longer fit Intel’s core vision, it still holds considerable value and market relevance.
The spin-off could unlock additional operational flexibility and provide dedicated leadership for a segment that still serves critical telecom infrastructure and enterprise customers.
Competing in the AI Arms Race
One of the key motivations behind Intel’s new trajectory is the intensifying race to lead in artificial intelligence. Tan has made it clear that competing in AI will require a more focused and agile organization. By streamlining operations and exiting side businesses, Intel hopes to redirect resources toward catching up with Nvidia and other dominant players in the AI acceleration market.
Shedding the networking unit may give Intel the bandwidth—both literally and figuratively—to focus on building chips tailored for AI workloads, high-performance computing, and future-ready data centers.
A Make-or-Break Moment for Intel
Intel’s current transformation under Lip-Bu Tan represents a make-or-break moment for the company. If successful, the pivot could help Intel reclaim its leadership role in the semiconductor industry. But the stakes are high: missed targets, operational delays, or poor investor reception could push Intel further behind in an increasingly competitive landscape.
For now, all eyes are on the networking spin-off and whether Tan’s leaner, meaner Intel can reverse its downward trend.
