Intel has dodged at least one shareholder lawsuit accusing the chipmaker of misleading investors about the health of its struggling foundry business.
On Tuesday, California federal district Judge Trina Thompson approved [PDF] Intel's motion to dismiss the case after determining that the plaintiffs had misattributed a $7 billion loss, reported in April, to Intel Foundry Services (IFS) rather than its internal factory operations.
IFS refers to the x86 giant's contract manufacturing business formed by now-ex-CEO Pat Gelsinger following his return to the company in 2021, and up until the corporation restructured last year was reported as a separate division from Intel's internal manufacturing operations. In short, IFS did chip fabrication work under contract for outside customers, and the internal operation produced Intel's own products.
Since forming IFS, Gelsinger and CFO David Zinsner repeatedly touted growing interest in IFS. So, when Intel implemented an accounting change early last year that consolidated its internal and external foundry efforts into a single business unit called "Intel Foundry" it suddenly appeared as if, despite all the positive spin, the group had managed to lose $7 billion the year prior.
In reality, the changes meant that losses incurred from manufacturing Intel's own products were no longer obscured by the sales of said products and had little if anything to do with IFS.
It seems the litigants in the case failed to discern this fact, accusing Gelsinger and Zinsner of making misleading statements that misrepresented the health of the corp's foundry unit, inflating its share price in the process.
However, as Judge Thompson pointed out, Gelsinger's statements regarding "growing demand" were made in the context of customer commitments and contract wins, not revenue.
"There are no allegations that indicate defendants led investors to believe that the IFS reporting results for fiscal year 2023 included results for the entire internal foundry model," she wrote. "The complaint itself misleadingly conflates IFS and the internal foundry."
In other words, just because its internal foundry is burning cash doesn't mean Gelsinger was lying about IFS garnering interest and customer commitments.
While the case has been dismissed, Intel isn't out of the woods yet. In the decision, Thompson offered the plaintiffs the opportunity to file an amended complaint. On top of that, Intel has faced multiple lawsuits in the past year over its foundry operations, which appear to be still ongoing or consolidated with others.
We'ved asked Intel if it has any comment to share on its court win this week. ®