Intel Faces Shareholder Lawsuit Over Alleged Misguidance on Foundry Performance
Intel's turbulent year takes another hit as the company is now embroiled in a $207 million shareholder lawsuit, alleging misguidance over its Intel Foundry Services (IFS). Filed by LR Trust in federal court in San Jose, California, the lawsuit targets Intel's former CEO Pat Gelsinger and current CFO David Zinsner, accusing them of misleading shareholders about IFS's performance and financial outlook.
Allegations Against Intel Leadership
The lawsuit claims that Intel knowingly provided false and misleading statements about IFS, portraying it as a growth driver despite mounting operational losses. According to the plaintiffs, Intel reported significant operating losses of $7 billion in 2023, which allegedly continued into 2024. This stark contrast between public assurances and financial reality, the lawsuit argues, led shareholders to invest under false pretenses.
Specific allegations include:
IFS's growth was misrepresented as indicative of revenue gains.
The division suffered substantial operating losses.
Intel failed to maintain adequate internal controls.
Lower internal revenue contributed to declining product profit.
The plaintiffs are demanding compensation equivalent to the salaries and benefits received by Gelsinger and Zinsner during the period in question.
A History of Overpromising?
Intel Foundry Services, once envisioned as a key pillar of the company's comeback strategy under Gelsinger, has struggled to meet expectations. Despite semiconductor demand reaching record highs, IFS has failed to secure significant mainstream clients. Optimistic projections from leadership reportedly exacerbated shareholder discontent, especially as IFS reported declining profits and ongoing financial instability.
This lawsuit is not Intel's first legal trouble this year. A similar case was filed in August, further compounding the company’s challenges as it contends with declining market share, stiff competition, and organizational restructuring.
The Road Ahead
With this lawsuit now underway, Intel faces significant financial and reputational risks. Beyond the courtroom, the future of Intel Foundry Services looks uncertain, raising questions about whether Intel can sustain its ambitious plans or if a division sell-off is looming.
What do you think about Intel's Foundry troubles? Should the company refocus its strategy, or is it too late to save this division? Let us know in the comments below!
