Intel stock is rising. Can a breakup plan save the company?

Actions of Intel (NASDAQ: INTC) were on the move Friday following news that the company is considering spinning off its manufacturing arm from its core chip design operation to rehabilitate itself and create shareholder value.

The news came after a disastrous earnings report earlier this month that included lackluster results, disappointing guidance, the elimination of the stock dividend and a restructuring plan that will cut at least 15 percent of its workforce.

Investors, who have been eager for any signs of change at Intel, cheered the news, sending the stock up 7.6% as of 1:10 p.m. ET.

Is it time to break up Intel?

According to Bloomberg, Intel is discussing strategic options with investment bankers — options that could include splitting the two main business segments or scrapping some of the planned factory expansions that have been a cornerstone of CEO Pat Gelsinger’s turnaround strategy.

Intel’s board is expected to revise a number of options in September.

It shouldn’t be much of a surprise that Intel is considering such major changes, since it’s clearly struggling and the stock is hovering around 20-year lows.

Is Intel stock a buy on the news?

At this point, Friday’s earnings look more like a dead cat jumped for stocks than anything fundamentally meaningful. Separating the manufacturing business from the rest of the company could be a win for investors because the foundry operations have been a drag on its overall results, but it would also undermine Gelsinger’s long-term strategy. Such a change might even require a new CEO.

While the issue is worth watching, and investors should pay attention to any news that comes out of next month’s board meeting, Friday’s jump looks more like a sign of desperation on the part of investors than a real reason to buy the stock.

Expect volatility in Intel stock to continue as its restructuring still has a long way to go.

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Jeremy Bowman has no position in any of the listed stocks. The Motley Fool recommends Intel and recommends the following options: November 2024 $24 short calls on Intel. The Motley Fool has a disclosure policy.

Intel stock is rising. Can a breakup plan save the company? was originally published by The Motley Fool