Could Intel (INTC) be on the verge of splitting itself into two? Is this company going to break itself up into P.C. Semiconductor Co. and High-Growth Co., which includes Internet of things and data centers and all of the cool gizmos that are involved in communications?
Is that why the highly respected Stacy Smith, one of my absolute favorite chief financial officers, is moving to a new position where he is basically overseeing sales and manufacturing -- pretty much the guts of the institution?
When we interviewed Intel CEO Brian Krzanich this morning, I couldn't resist asking him if the company was going to split in two, with the slower-growth personal computer chip business being run by Stacy and Brian taking the faster-growth company and really turning on the jets with it.
Think about it: Just like so many companies that have these big cash-cow divisions that are slowing down the company's growth and bringing down the valuation and impeding the natural worth of the enterprise, Intel has really been kept back by the decline in personal computers. In fact, the company took down numbers hard, in part because it said personal computers were going to decline at a high single-digit pace, not at the mid-single-digit rate that it had said just a quarter ago.
That's one of the reasons why it has to lay off 12,000 people. The table of employment had to be shrunk because Intel needs to find the money to expand the fast-moving stuff, the stuff that people like so much in Broadcom (AVGO), which is the hottest semiconductor company because it is all about communications and the Internet of things.
The greatness of Intel, the reason why it could split the company up, is that the stand-alone personal computer business still grows and it still makes a ton of money. It spews cash because Intel is pretty much the only company left in the game that still makes these kinds of microprocessors. There will be ample money to fund a good dividend and a decent rate of capital expenditures to assure that no one catches the company and gets ahead of it when it comes to processor technology.
So I put it out there, calling it a conspiracy theory but just venturing why Stacy Smith would be moving around the company instead of staying CFO, perhaps being groomed to run Old Co., the processor business.
And what happened? Brian didn't shoot it down. Not one bit. In fact, I thought he encouraged the thought.
He could have stuck a fork in it, laughed it off, said "Where did you get that?" or pulled a Greg Hayes, the CEO of United Technologies (UTX), who now famously told us on "Squawk Box" that there was no way no how Honeywell (HON) was going to buy his company.
Nope. He made me feel like I read his mind. And why not? I think the move would unlock tremendous value.
And you know what else makes me feel I am right? How about the stock. If Intel was just going to stay one company, what the heck is it doing up today given that so many analysts were disappointed with the results of the quarter? I think it is because Intel is willing to bite the bullet and give you the sum of its parts.
Oh, and one other thing. I would like to think I know Brian Krzanich. He isn't about frustrating shareholder value. He's about creating it and reinventing Intel, just like the boys did in the 1980s when they bit the bullet and stopped making commodity chips and invented the 86, the forerunner of what's currently in your PC.
When they made the move, people found it shocking. A few years later, it had moved from an also-ran top 20 semiconductor company to being the world's biggest and most successful ever. I think Krzanich is about to do it again, this time out of what Intel is known for -- personal computers -- and into all the fast stuff that people like so much.
I say if you own Intel, keep it. If you don't, consider it. Brian is going to bring out the value and you don't want to miss it.
No, it's not going to happen tomorrow. But you are being paid to wait with a 3.24% yield, a fabulous balance sheet and still among the greatest manufacturing assets in the world. I would take that bet any day of the week.