Intel reduces dividend to conserve capital

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Intel Corporation announced that it will reduce its quarterly dividend by nearly 25% in order to conserve capital in the face of ongoing supply chain challenges and increased competition. The company announced a dividend cut of 66% from its previous payout of 50 cents per share annually or $0.125 per share quarterly.

The dividend cut comes as Intel faces increased competition from Advanced Micro Devices (AMD) and Nvidia, as well as supply chain challenges due to semiconductor shortages and disruptions in global logistics. Due to manufacturing issues, the company announced in January that it would delay the release of some of its high-end chips.

“While painful, this was a necessary step in ensuring capital is available for their manufacturing plan,” Credit Suisse analyst Chris Caso said.

In an effort to address some of its supply chain challenges and remain competitive in the market, Intel has also been exploring strategic alternatives, such as the possibility of outsourcing more of its manufacturing to third-party foundries.

Intel has committed to reducing costs by $3 billion this year, with a goal of saving between $8 and $10 billion by the end of 2025. It will also reduce its dividend payout to its lowest level in 16 years and will scale back large investments to save money as demand for its chips used in personal computers and data centers slows.

The move to lower the dividend is part of a broader effort by Intel to conserve capital and invest in future growth opportunities, according to CEO Pat Gelsinger. The company has already announced plans to invest $20 billion in two new chip factories in Arizona, as well as $3.5 billion in a chip plant in New Mexico.

The sources for this piece include an article in Reuters.

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