Intel slashes dividend by nearly two-thirds to shore up cash as chip giant braces for a tough year

In January, when Intel reported one of its worst financial quarters in years, the chip giant worked to keep up investor confidence by holding its dividend steady at $0.365/share. Less than a month later, it's singing a very different tune. The company today announced that it was revising its dividend to $0.125 per share, down nearly two-thirds, as part of a bigger effort to conserve cash amid the very tough economic environment, and how it's playing out specifically in the tech sector.

The dividend cut underscores the darker outlook Intel has for the year ahead. The company's dividend has been level at $0.36 for many quarters and has dipped below $0.30 since 2017, and while dividends do not impact non-investors -- they can be used to keep investors happy even through rockier patches, such as a bad stock decline or disappointing earnings, and also simply to keep the stock at a premium overall: Intel's paid out some $80 billion in dividends since 1992 -- they are also a bellwether of the company's bigger state.

Intel is explaining the cut in the context of bigger efforts at the company to cut up to $3 billion this year, and up to $10 billion per year by 2025 -- which it will be doing by phasing out certain operations, laying off employees, reducing compensation from executives and making other cuts. It's also taking a bigger bet on its own tech by building out its own internal foundry, which will take some investment (and comes with its own risk of course), alongside the always-clear-and-present threat of competition in the area of cutting-edge chip design. CEO Pat Gelsinger said the latter of these are still on track.

“Prudent allocation of our owners’ capital is important to enable our IDM 2.0 strategy and sustain our momentum as we rebuild our execution engine,” he said in a statement today. “We remain on track to deliver five nodes in four years and continue to expand the IFS (Intel Foundry Services) customer base. We are well into the ramp of 13th Gen Intel® Core™ and 4th Gen Intel® Xeon® Scalable processors, and we look forward to the launch of Meteor Lake and Emerald Rapids in 2023 and Granite Rapids and Sierra Forest in 2024.”

Intel in October 2022 was reportedly gearing up for thousands of job cuts in the quarter ahead. A spokesperson today confirmed that while it has reduced its workforce it has yet to confirm an exact number of people impacted. The company at the end of 2022 employed nearly 132,000 people. It's also cut compensation for executives and managers, including a 25% cut for Gelsinger himself.

The company last quarter saw revenues decline 32% on the year before to $14 billion, which also missed analysts' estimates. All eyes are now on how the company will be doing in the year ahead with current and future orders. Gelsinger dismissed recent reports alleging chip delays as "rumors" in a call today.