Strategy reversal! Intel (INTC.US) halts network division spin-off plans to focus on internal integration and deepening AI and edge computing layout

The Zhitong Finance App learned that Intel (INTC.US) said that after evaluation, the company decided not to split or sell shares in its network division. The company believes that the network division is more likely to grow successfully by operating as an internal business unit.

“After a thorough evaluation of NEX's strategic options for the networking division — including a potential independent operating path — we determined that keeping the business within the Intel system would best benefit its development,” the company said in an email statement on Wednesday. “Incorporating NEX into internal operations will help achieve deep integration of chips, software, and systems, thereby strengthening our customer solution capabilities in artificial intelligence, data centers and edge computing.”

A company spokesperson added that as part of this strategic adjustment, Intel has terminated negotiations with Ericsson (ERIC.US), and the two sides have previously discussed the possibility of Ericsson's acquisition of part of NEX's shares. Intel revealed earlier this year that it plans to split its networking division and is looking for strategic investors.

This plan adjustment reflects Intel CEO Chen Liwu's transformation strategy since taking office in March of this year. During his tenure, he mainly focused on promoting the optimization of the company's operations through layoffs and divestment of non-core businesses.

Ericsson representatives declined to comment.

Since the summer of this year, Intel has benefited from significant capital injections. In an unconventional deal brokered by the Trump administration, the US government bought 10% of the chip maker's shares in August. Additionally, Intel received an investment of $2 billion from SoftBank Group (SFTBY.US) and an additional $5 billion capital injection from Nvidia (NVDA.US). Against this backdrop, Intel's stock price has more than doubled this year.

Earlier this year, Ericsson considered investing to help Intel keep its business running. Ensuring the continued operation of Intel's NEX division is critical for the Swedish telecom equipment manufacturer — as many of its hardware products rely on chips designed by Intel for its mobile networking devices. The partnership between the two companies deepened at the beginning of last year, when Ericsson announced that its future infrastructure would use Intel's next generation Xeon processors to improve operating speed and energy efficiency.

In recent years, Intel has gradually fallen behind in competition with competitors such as TSM.US and Samsung Electronics (SSNLF.US). Former CEO Pat Gelsinger was forced to step down last year because his expensive “foundry business transformation plan” failed to quickly pay off as expected by the board of directors. Intel then began drastically cutting costs and considering selling non-core businesses to improve its financial situation, including plans to spin-off NEX.