Intel’s restructuring at one point required spinning off the accounting of its Foundry division, a move that revealed an unpleasant truth: the company had an operating loss of $7 billion in fiscal 2023. Shareholders tried to sue Intel for concealing this information, but lost.
Image source: GlobalFoundries
The plaintiffs tried to prove, as Reuters recalls, that it was the sudden disclosure of information about Intel Foundry’s multi-billion dollar losses that led to massive layoffs and a $32 billion decline in Intel’s entire capitalization as a result of a 26% drop in stock prices in one day.
The plaintiffs also alleged that Intel’s stock price was artificially inflated between January 25, 2024, and August 1, 2024. On the latter date, Intel reported a quarterly loss of $1.61 billion and plans to lay off more than 15,000 employees and suspend its dividend in order to save $10 billion in expenses through 2025. Intel’s growing losses in its Foundry division first became known in April last year, when the company began reporting quarterly results under new accounting principles.
This week, U.S. District Judge Trina Thompson in San Francisco rejected plaintiffs who claimed Intel had hidden the size of its losses for too long. The court ruled that the plaintiffs had misrepresented the structure of the losses by attributing the entire $7 billion to Intel Foundry. The judge also ruled that Intel’s new financial reporting structure, which takes into account the so-called “Intel Foundry Model,” did not mislead shareholders.
Former CEO Patrick Gelsinger’s statements last March about Intel attracting “significant customer interest” and “growing demand for contract manufacturing offerings” were not misleading to investors, the court ruled, because they related only to individual customers and not to overall revenue trends, which were declining. Intel is in crisis mode anyway, having lost its CEO in early December and is still searching for a new one. The court simply now shows that Intel’s former management did not have malicious intent or the intent to mislead shareholders. The plaintiffs still have the right to file an amended claim.