Intel Wins Legal Battle: Judge Dismisses Shareholder Lawsuit Over Foundry Losses

Intel has successfully defended itself against a shareholder lawsuit that accused the company of misleading investors about the performance of its struggling foundry business.

On Tuesday, federal district Judge Trina Thompson in California granted Intel’s request to dismiss the lawsuit, determining that the plaintiffs incorrectly attributed a significant $7 billion loss, disclosed in April, to Intel Foundry Services (IFS) instead of its internal manufacturing operations.

Intel Foundry Services was established by former CEO Pat Gelsinger after he returned to the company in 2021. Until a restructuring last year, IFS operated as a separate entity from Intel's internal manufacturing. While IFS focused on contract manufacturing for external clients, the internal segment was responsible for producing Intel’s own products.

Since the inception of IFS, Gelsinger and CFO David Zinsner have highlighted the increasing interest in the division. However, an accounting change made early last year combined the internal manufacturing and IFS into a single business unit called "Intel Foundry." This consolidation led to the perception that the entire foundry division had lost $7 billion the previous year, despite ongoing positive statements from the company.

In fact, this accounting shift meant that losses from Intel’s own product manufacturing were not hidden anymore by the sales of those products, and they had little to do with the performance of IFS.

The plaintiffs in the lawsuit misinterpreted the situation, claiming that Gelsinger and Zinsner had made misleading declarations that inflated the company’s stock price by misrepresenting the condition of the foundry business.

Judge Thompson clarified that Gelsinger’s comments about "growing demand" were related to new customer commitments and contract acquisitions, rather than revenue figures. She stated, "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." The judge emphasized that the lawsuit inaccurately conflated IFS with internal operations.

Essentially, just because losses were evident in Intel’s internal foundry efforts does not mean Gelsinger was untruthful regarding the interest and commitments received by IFS.

Though this lawsuit has been dismissed, Intel is not completely in the clear. Judge Thompson provided the plaintiffs with an opportunity to file a revised complaint. Additionally, Intel has dealt with multiple other lawsuits over its foundry operations within the last year, some of which are still active or have been consolidated with others.

Intel has yet to comment officially regarding the outcome of this case.

Intel, lawsuit, foundry