Intel lost about $25 billion in market value and reported a 26 per cent drop in stock price on Friday in what marked its worst sell-off since 2000.
The drop was driven by weaker-than-expected earnings in the June quarter, the suspension of dividend payments and plans to cut jobs to fund the overhaul of its chip manufacturing division – all part of Intel's $10 billion cost-reduction plan.
Industry analysts view these cost-cutting initiatives as the company’s attempt to turnaround its chip-making business amid dwindling profits and market share.
The National looks at the factors contributing to the share price crash of a company that was once an undisputed leader in the chip market and explores what lies ahead for the company and the overall industry.
Steepest decline since 2000
Intel fell 26.06 per cent to close at $21.48 a share on Friday, plummeting the company's market value to $96.76 billion. It closed 5.5 per cent down at $29.05 on Thursday, giving the company a market capitalisation of $121.21 billion.
Friday's decline in market cap marked the company's biggest drop since shares crashed after the dot-com bubble burst between 2000 and 2002. It also marked the second-largest decline in the company's shares, surpassed only by a 31 percent drop in July 1974, three years after Intel's initial public offering.
The company's shares have dropped 55.06 per cent since the start of the year and 37.54 per cent in the past 12 months.
Industry experts expect the company to fall further next week.
Financial services company Raymond James adjusted its outlook on Intel on Friday, shifting the stock from an “outperform” rating to “market perform”. It expressed concerns over the chip maker’s future earnings potential.
In stock markets, an outperform rating signals an expectation that shares will perform better than the overall market while the market perform rating indicates that the stock could provide average returns.
Once part of Four Horsemen
The company was part of dot-com era's Four Horsemen, the term referred to four major technology companies – Intel, Cisco, Microsoft and Dell. They were considered leading players in the tech industry during the dot-com boom of the late 1990s and early 2000s.
Intel’s market cap reached its peak at about $500 billion in the 2000 but this was followed by a significant decline in the stock market, known as the dot-com crash, during which the shares of many tech companies plummeted.
After that sell-off, Intel's stock market value never returned to its peak.
Investor confidence ebbs
One of the largest chip makers by revenue, Intel reported a net loss of $1.6 billion in the second quarter ended on June 29, compared with a net income of $1.5 billion in the same period last year.
The loss per share stood at 38 cents in the last quarter against earnings per share of 35 cents in the corresponding period in 2023.
Revenue during the April-June period dropped by about 1 per cent annually to $12.8 billion, missing analyst expectations of $12.9 billion.
Its operating loss expanded to $2 billion in the previous quarter compared to $1 billion in the prior year period.
Gross margin – a financial metric that highlights the percentage of revenue that tops the cost of goods sold – stood at 35.4 per cent, down 0.4 percentage points.
In its note to investors, Raymond James cautioned that gross margin headwinds were expected to continue through next year, with limited opportunities for revenue growth.
It indicated that the company's profitability would remain under pressure in the coming quarters.
Pessimistic top executives
On Thursday, Intel chief executive Pat Gelsinger said that the second-half trends of fiscal 2024 will be more challenging than the company had previously expected.
His comments added to investors' worries and led to a decline in the price of Intel's shares and market cap on Friday.
“Our second-quarter financial performance was disappointing, even as we hit key product and process technology milestones,” Mr Gelsinger said.
He said the company is taking new cost cutting decisions amid hopes that this could potentially improve operating and capital efficiencies in the coming quarters.
“Second-quarter results were impacted by gross margin headwinds from the accelerated ramp of our AI PC [artificial intelligence-enabled PCS] product, higher-than-typical charges related to non-core businesses and the impact from unused capacity,” said chief financial officer David Zinsner.
The company also issued a dismal guidance for the third quarter, ending on September 29.
For the July-September period, Intel predicted its revenue to hover between $12.5 billion and $13.5 billion, compared to $14.2 billion reported in the same period of last year. It expects its loss per share to reach 24 cents during the period.
Few cheers for expense reduction
Intel have announced a series of cost-reduction initiatives that aim to hasten growth in profitability and operational efficiency.
Some of the actions include structural and operational realignment, headcount reductions and the cutting of operating expenses and capital expenditure totalling more than $10 billion by 2025.
Intel expects these moves to help put it on the path to a sustainable business model, with additional financial resources and liquidity needed to support its long-term strategy. The tech giant said these initiatives will implement the next phase of a multiyear transformation strategy.
Cutting expenses
Intel has announced plans to reduce total capital expenditure by more than a fifth, compared with previous estimates, to between $25 billion and $27 billion this year and to between $20 billion and $23 billion in 2025.
The company has also announced plans to cut operating expenses to about $20 billion this year and $17.5 billion in 2025, with further reductions expected in 2026.
“By implementing our spending reductions, we are taking proactive steps to improve our profits and strengthen our balance sheet,” Mr Zinsner said.
“We expect these actions to meaningfully improve liquidity and reduce our debt balance while enabling us to make the right investments to drive long-term value for shareholders.”
Slashing jobs and suspending dividends
Intel will reduce its headcount by 15,000, or 15 per cent of its workforce. Most of the affected employees will be let go by the end of this year.
Next week, Intel will announce a companywide enhanced retirement programme for eligible employees and encourage employees to opt for voluntary retrenchment to cut costs.
“This is painful news for me to share. I know it will be even more difficult for you to read ... this is an incredibly hard day for Intel as we are making some of the most consequential changes in our company’s history,” said Mr Gelsinger in a memo to the staff announcing job cuts
The company also suspended dividends from the fourth quarter and defended the move as crucial to preserving liquidity to support the investment needed to execute its future strategy.
“Our costs are too high, our margins too low. We need bolder actions to address both – particularly given our financial results and outlook for the second half of 2024, which is tougher than previously expected,” Mr Gelsinger said.
Leading global decline
Intel’s losses led global chip companies to fall on Friday. Another US chip maker and AI company Nvidia was down 1.78 per cent at market close, ending at $107.27 a share on Friday.
In Asia, Taiwan Semiconductor Manufacturing Company, popularly known as TSMC, closed more than 4.5 per cent lower in Taiwan while Samsung was trading 4.21 per cent down.
Another chip maker SK Hynix, which has some big customers such as Nvidia, closed 10.40 per cent lower.
Has Intel struggled to adapt to evolving demands?
“Intel’s stock decline has been in the making for quite some time … their earnings miss, cost cutting plans and unprecedented layoffs are disastrous moves for the company. Decline in stock price will be hard to bounce back soon,” Robert Hodgins, founder of Miami-based Sand Hill Road Technologies Fund, told The National.
Industry analysts noted that Intel has potentially missed the opportunity to capitalise on the surging demand for computing power driven by AI, a move that allowed companies like Nvidia to gain a competitive edge.
The company also failed to recognise the shift in the semiconductor industry, where different parts of the production process - such as design, manufacturing, and packaging - have become more specialized and are often handled by separate companies, Dev Nag, founder and chief executive of California-based technology firm QueryPal, said.
“Intel has long been a vertically integrated company … this was great for efficiency and dominance in the mature CPU [central processing unit] market, but has become something of a hindrance in the fast moving AI chip market,” Mr Nag told The National.
Sarfira
Director: Sudha Kongara Prasad
Starring: Akshay Kumar, Radhika Madan, Paresh Rawal
Rating: 2/5
The Byblos iftar in numbers
29 or 30 days – the number of iftar services held during the holy month
50 staff members required to prepare an iftar
200 to 350 the number of people served iftar nightly
160 litres of the traditional Ramadan drink, jalab, is served in total
500 litres of soup is served during the holy month
200 kilograms of meat is used for various dishes
350 kilograms of onion is used in dishes
5 minutes – the average time that staff have to eat
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
PROFILE OF INVYGO
Started: 2018
Founders: Eslam Hussein and Pulkit Ganjoo
Based: Dubai
Sector: Transport
Size: 9 employees
Investment: $1,275,000
Investors: Class 5 Global, Equitrust, Gulf Islamic Investments, Kairos K50 and William Zeqiri
Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
Water waste
In the UAE’s arid climate, small shrubs, bushes and flower beds usually require about six litres of water per square metre, daily. That increases to 12 litres per square metre a day for small trees, and 300 litres for palm trees.
Horticulturists suggest the best time for watering is before 8am or after 6pm, when water won't be dried up by the sun.
A global report published by the Water Resources Institute in August, ranked the UAE 10th out of 164 nations where water supplies are most stretched.
The Emirates is the world’s third largest per capita water consumer after the US and Canada.
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Fund-raising tips for start-ups
Develop an innovative business concept
Have the ability to differentiate yourself from competitors
Put in place a business continuity plan after Covid-19
Prepare for the worst-case scenario (further lockdowns, long wait for a vaccine, etc.)
Have enough cash to stay afloat for the next 12 to 18 months
Be creative and innovative to reduce expenses
Be prepared to use Covid-19 as an opportunity for your business
* Tips from Jassim Al Marzooqi and Walid Hanna
Ways to control drones
Countries have been coming up with ways to restrict and monitor the use of non-commercial drones to keep them from trespassing on controlled areas such as airports.
"Drones vary in size and some can be as big as a small city car - so imagine the impact of one hitting an airplane. It's a huge risk, especially when commercial airliners are not designed to make or take sudden evasive manoeuvres like drones can" says Saj Ahmed, chief analyst at London-based StrategicAero Research.
New measures have now been taken to monitor drone activity, Geo-fencing technology is one.
It's a method designed to prevent drones from drifting into banned areas. The technology uses GPS location signals to stop its machines flying close to airports and other restricted zones.
The European commission has recently announced a blueprint to make drone use in low-level airspace safe, secure and environmentally friendly. This process is called “U-Space” – it covers altitudes of up to 150 metres. It is also noteworthy that that UK Civil Aviation Authority recommends drones to be flown at no higher than 400ft. “U-Space” technology will be governed by a system similar to air traffic control management, which will be automated using tools like geo-fencing.
The UAE has drawn serious measures to ensure users register their devices under strict new laws. Authorities have urged that users must obtain approval in advance before flying the drones, non registered drone use in Dubai will result in a fine of up to twenty thousand dirhams under a new resolution approved by Sheikh Hamdan bin Mohammed, Crown Prince of Dubai.
Mr Ahmad suggest that "Hefty fines running into hundreds of thousands of dollars need to compensate for the cost of airport disruption and flight diversions to lengthy jail spells, confiscation of travel rights and use of drones for a lengthy period" must be enforced in order to reduce airport intrusion.
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The specs
Engine: 3.9-litre twin-turbo V8
Power: 620hp from 5,750-7,500rpm
Torque: 760Nm from 3,000-5,750rpm
Transmission: Eight-speed dual-clutch auto
On sale: Now
Price: From Dh1.05 million ($286,000)
KILLING OF QASSEM SULEIMANI
KILLING OF QASSEM SULEIMANI
ICC T20 Team of 2021
Jos Buttler, Mohammad Rizwan, Babar Azam, Aiden Markram, Mitchell Marsh, David Miller, Tabraiz Shamsi, Josh Hazlewood, Wanindu Hasaranga, Mustafizur Rahman, Shaheen Afridi
Tamkeen's offering
- Option 1: 70% in year 1, 50% in year 2, 30% in year 3
- Option 2: 50% across three years
- Option 3: 30% across five years
The specs: 2018 Audi R8 V10 RWS
Price: base / as tested: From Dh632,225
Engine: 5.2-litre V10
Gearbox: Seven-speed automatic
Power: 540hp @ 8,250rpm
Torque: 540Nm @ 6,500rpm
Fuel economy, combined: 12.4L / 100km
%3Cp%3EMATA%0D%3Cbr%3EArtist%3A%20M.I.A%0D%3Cbr%3ELabel%3A%20Island%0D%3Cbr%3ERating%3A%203.5%2F5%3C%2Fp%3E%0A
Scoreline
UAE 2-1 Saudi Arabia
UAE Mabkhout 21’, Khalil 59’
Saudi Al Abed (pen) 20’
Man of the match Ahmed Khalil (UAE)
MATCH INFO
Manchester City 2 (Mahrez 04', Ake 84')
Leicester City 5 (Vardy 37' pen, 54', 58' pen, Maddison 77', Tielemans 88' pen)
Man of the match: Jamie Vardy (Leicester City)
Bert van Marwijk factfile
Born: May 19 1952
Place of birth: Deventer, Netherlands
Playing position: Midfielder
Teams managed:
1998-2000 Fortuna Sittard
2000-2004 Feyenoord
2004-2006 Borussia Dortmund
2007-2008 Feyenoord
2008-2012 Netherlands
2013-2014 Hamburg
2015-2017 Saudi Arabia
2018 Australia
Major honours (manager):
2001/02 Uefa Cup, Feyenoord
2007/08 KNVB Cup, Feyenoord
World Cup runner-up, Netherlands
Winners
Best Men's Player of the Year: Kylian Mbappe (PSG)
Maradona Award for Best Goal Scorer of the Year: Robert Lewandowski (Bayern Munich)
TikTok Fans’ Player of the Year: Robert Lewandowski
Top Goal Scorer of All Time: Cristiano Ronaldo (Manchester United)
Best Women's Player of the Year: Alexia Putellas (Barcelona)
Best Men's Club of the Year: Chelsea
Best Women's Club of the Year: Barcelona
Best Defender of the Year: Leonardo Bonucci (Juventus/Italy)
Best Goalkeeper of the Year: Gianluigi Donnarumma (PSG/Italy)
Best Coach of the Year: Roberto Mancini (Italy)
Best National Team of the Year: Italy
Best Agent of the Year: Federico Pastorello
Best Sporting Director of the Year: Txiki Begiristain (Manchester City)
Player Career Award: Ronaldinho
Most F1 world titles
7 — Michael Schumacher (1994, ’95, 2000, ’01 ’02, ’03, ’04)
7 — Lewis Hamilton (2008, ’14,’15, ’17, ’18, ’19, ’20)
5 — Juan Manuel Fangio (1951, ’54, ’55, ’56, ’57)
4 — Alain Prost (1985, ’86, ’89, ’93)
4 — Sebastian Vettel (2010, ’11, ’12, ’13)
The Buckingham Murders
Starring: Kareena Kapoor Khan, Ash Tandon, Prabhleen Sandhu
Director: Hansal Mehta
Rating: 4 / 5
Essentials
The flights
Etihad and Emirates fly direct from the UAE to Delhi from about Dh950 return including taxes.
The hotels
Double rooms at Tijara Fort-Palace cost from 6,670 rupees (Dh377), including breakfast.
Doubles at Fort Bishangarh cost from 29,030 rupees (Dh1,641), including breakfast. Doubles at Narendra Bhawan cost from 15,360 rupees (Dh869). Doubles at Chanoud Garh cost from 19,840 rupees (Dh1,122), full board. Doubles at Fort Begu cost from 10,000 rupees (Dh565), including breakfast.
The tours
Amar Grover travelled with Wild Frontiers. A tailor-made, nine-day itinerary via New Delhi, with one night in Tijara and two nights in each of the remaining properties, including car/driver, costs from £1,445 (Dh6,968) per person.
MATCH INFO
BRIGHTON 0
MANCHESTER UNITED 3
McTominay 44'
Mata 73'
Pogba 80'
The story in numbers
18
This is how many recognised sects Lebanon is home to, along with about four million citizens
450,000
More than this many Palestinian refugees are registered with UNRWA in Lebanon, with about 45 per cent of them living in the country’s 12 refugee camps
1.5 million
There are just under 1 million Syrian refugees registered with the UN, although the government puts the figure upwards of 1.5m
73
The percentage of stateless people in Lebanon, who are not of Palestinian origin, born to a Lebanese mother, according to a 2012-2013 study by human rights organisation Frontiers Ruwad Association
18,000
The number of marriages recorded between Lebanese women and foreigners between the years 1995 and 2008, according to a 2009 study backed by the UN Development Programme
77,400
The number of people believed to be affected by the current nationality law, according to the 2009 UN study
4,926
This is how many Lebanese-Palestinian households there were in Lebanon in 2016, according to a census by the Lebanese-Palestinian dialogue committee
