New lawsuit against Intel blames management for failures of Foundry’s contract business

Investor expectations related to the restructuring of Intel, which was started in 2022 by now former CEO Patrick Gelsinger, have not yet been justified. That has led some investors to file a class-action lawsuit against Intel, accusing current and former executives of failing the manufacturing business and hiding information about its distress.

Image Source: Intel

The plaintiffs are Intel shareholders who accuse Patrick Gelsinger and his interim successor David Zinsner, as well as various members of the board of directors, of neglecting their official duties, illegal enrichment and misappropriation of corporate funds. Any relief in the claim, if ordered by the court, must be made to Intel and not to the individual shareholders. Over the course of three years from 2021, Gelsinger alone managed to receive compensation for his work in the amount of $207 million, and the lawsuit disputes the fairness of this compensation.

In April 2024, Intel, due to changes in the structure of financial statements, disclosed that in 2023 the manufacturing division of Intel Foundry Services (IFS) earned $18.9 billion, but suffered losses of $7 billion. At the end of the second quarter of this year, operating losses IFS increased from $1.87 to $2.83 billion. According to the plaintiffs, Intel management had previously shown no signs of concern about such financial prospects and hid the truth from shareholders about the plight of the manufacturing unit.

According to the prosecution, the increase in IFS indicators, which was presented to shareholders, was not accompanied by an increase in revenue in this area. Secondly, it suffered significant operating losses in 2023. Third, profit from sales of IFS products decreased as a result of a decrease in overall revenue. Accordingly, IFS cannot be considered a factor justifying changes in Intel’s strategy. The company’s management, according to the plaintiffs, did not provide sufficiently effective corporate control at this stage of business development.