Intel is undergoing a significant restructuring, highlighted by the spin-off of its Networking and Edge Group (NEX) into an independent company. This move is part of a broader strategy implemented by CEO Lip-Bu Tan to streamline operations, reduce expenses, and refocus the company on core areas like x86 architecture and artificial intelligence. Intel will remain an anchor investor in the new entity, similar to its approach with Altera, ensuring it can still benefit from the unit's future growth. The company has already begun identifying strategic investors to support the growth and development of the new networking company.
The NEX division, which generated $5.8 billion in revenue in 2024, develops networking and communications chips. These chips are used in telecom equipment and data center networking. Sachin Katti, NEX General Manager and Intel's chief technology and AI officer, stated that the new independent company will focus on delivering leading silicon solutions for critical communications, enterprise networking, and Ethernet connectivity infrastructure. The aim is to allow the new company to innovate faster and invest in new offerings, accelerating its customer-facing strategy and product roadmap.
This restructuring comes amidst financial challenges for Intel, including a reported $2.9 billion loss in a recent quarter and a 9% drop in share value. Tan has described Intel as "overextended and inefficient" and is taking decisive actions to improve the company's financial performance. These actions include a 15% workforce reduction, which will bring the total number of employees down to 75,000 by the end of 2025. Intel is also scaling back its investments in its foundry business and has warned that its next-generation 14A node could be canceled if it fails to secure a major external customer.
The spin-off of NEX signals a shift in Intel's strategic priorities, reducing direct competition with Nvidia in the communications chip arena. By exiting non-essential segments, Intel aims to concentrate on its core CPU roadmap, with a focus on AI performance. Despite the challenges, Intel's core CPU roadmap remains on track, with projects like Panther Lake (built on the 18A node) planned for late 2025. This processor will emphasize AI performance and reintroduce Hyper-Threading to P-cores.
Intel's decision to spin off NEX mirrors its earlier sale of a majority stake in Altera to Silver Lake and the spin-off of RealSense. These moves reflect a broader trend of divesting non-core assets to sharpen focus and improve financial flexibility. While Intel will remain an anchor investor in the new networking company, it seeks additional strategic and capital partners to support its growth. The company is committed to a seamless transition for customers, with assurances of continued support and improved service. The long-term impact of these changes on Intel's competitive position and its ability to regain market share remains to be seen.
