Intel is 'breaking up'; to sell its networking division; read the note sent to customers

Intel has announced plans to establish its networking and communications business -- Network and Edge Group (NEX) -- as a stand-alone company. In a note to customers and employees the company said that it has begun the process of identifying investors for the business unit. The announcement comes as the new CEO Lip-Bu Tan looks to streamline the struggling chipmaker. While Tan didn’t talk about Intel’s decision to spin off NEX in the company’s earnings call on June 24, he discussed other actions it has taken to monetize “non-core assets”. This includes the sale of a portion of Intel’s stake in Mobileye earlier this month.

What Intel spokesperson said on selling Nex
“We plan to establish key elements of our Networking and Communications business as a stand-alone company and we have begun the process of identifying strategic investors,” the Intel representative said in a statement. “Like Altera, we will remain an anchor investor enabling us to benefit from future upside as we position the business for future growth,” the spokesperson added.

The NEX spin-off plan was announced to Intel customers and employees the same day the semiconductor giant revealed more changes under Tan’s leadership, including a 15 percent workforce reduction and a more conservative approach to its foundry business. “We are laser-focused on strengthening our core product portfolio and our AI roadmap to better serve customers,” the statement added.

Here's what Intel memo to customers reportedly says
The memo, seen by CRN, is reportedly written by Sachin Katti, who has led NEX, since early 2023. Katti was given the extra role of chief technology and AI officer by Intel CEO Lip-Bu Tan in April to lead Intel's AI strategy. Intel confirmed the content of the memo to CRN.

In Katti’s memo, he said Intel “internally announced” its plan to “establish its NEX business as a stand-alone company.” This will result in a “new, independent entity focused exclusively on delivering leading silicon solutions for critical communications, enterprise networking and ethernet connectivity infrastructure,” he added.

“While Intel will remain an anchor investor in the new company, we have begun the process of identifying additional strategic and capital partners to support the growth and development of the new company,” he wrote.

Katti said the move is “rooted in our commitment to serving” Intel’s customers better and promised that there will be “no change in service or the support” they rely on. He added that it will also help NEX “expand into new segments more effectively.”

“Backed by Intel, this new, independent company will be positioned to accelerate its customer-facing strategy and product road map by innovating faster and investing in new offerings,” said Katti, who expects the transition to be “seamless” for customers.

“What we expect to change is our ability to operate with greater focus, speed and flexibility—all to better meet your needs,” he wrote.

Intel memo to customers gives no timeline
Katti did not give a timeline for when Intel could spin off NEX, which has been mainly focused on networking and communications products after the company moved its edge computing business to the Client Computing Group last September. Intel also shifted its integrated photonics solutions to the Data Center Group that same month.

Similar to other businesses Intel has spun off, the company plans to maintain a stake in the stand-alone NEX company as it seeks out other investors, according to Katti.