Intel is facing a lawsuit from shareholders: Here's why
What's the story
Intel, the renowned chipmaker, is facing a lawsuit filed by its shareholders.
The legal action was initiated on Wednesday in a San Francisco federal court against Intel, its CEO Patrick Gelsinger, and CFO David Zinsner.
The shareholders allege that the company fraudulently concealed issues leading to poor financial performance, job cuts, and a halt in dividends.
Allegations
Misleading statements inflated stock price
The shareholders assert that misleading statements about Intel's business and manufacturing capabilities artificially boosted its share price from January 25 to August 1.
They were caught off guard when Intel revealed on August 1 that its contract chip-making business was underperforming, incurring billions of dollars in additional costs amid declining revenue.
This disclosure led to a substantial drop in Intel's market value, with a loss of over $32 billion in a single day.
Restructuring
Job cuts and dividend suspension
In a recent announcement, Intel disclosed plans to lay off more than 15% of its workforce, equating to over 15,000 jobs.
This move is part of a restructuring strategy aimed at saving $10 billion in 2025.
Concurrently, the company also announced it would suspend its dividend starting in the fourth quarter.
Financial downturn
Q2 financial results show net loss
Intel's second-quarter financial results revealed a net loss of $1.61 billion as revenue fell 1% to $12.83 billion.
Following these announcements, Intel's share price plummeted 26% to $21.48 on August 2 and further declined to $18.99 as of Wednesday, marking a total fall of 34.6% since the company's announcement.
Intel is grappling with competition from rival chipmakers such as Advanced Micro Devices, NVIDIA, Samsung Electronics, and Taiwan's TSMC, particularly in the AI race.