Intel Now Faces A Lawsuit Over Misguiding Foundry Performance; Blaming Former CEO Pat Gelsinger & CFO David Zinsner

Intel’s troubles just keep ramping up. The company now faces a lawsuit by its shareholders over misguidance regarding the performance of “Intel Foundry,” blaming the former CEO’s strategy.

Intel’s Legal Battles Keep Coming Up As The Company Now Under Fire For Adopting An Optimistic Approach Towards IFS

It seems like Team Blue is now facing a huge legal problem that could cost them a lot. According to a report by The Register, Intel is now being sued by LR Trust, a shareholder that blames the company for misguiding the performance of its divisions, notably Intel Foundry. The lawsuit is filed against Intel’s former CEO Pat Gelsinger and the firm’s CFO David Zinsner, where both of them are demanded to compensate for the damages, specifically asking for a sum of $207 million, which is said to be Gelsinger’s salary from 2021-2023.

The lawsuit targets the optimistic approach held by the company to Intel Foundry despite it not securing customers. It is claimed that Intel intentionally gave false and misleading statements about the revenue figures of IFS, which had apparently influenced the shareholders to pour in more finance. Interestingly, the lawsuit claims that IFS had an operating loss of $7 billion in 2023, extending into 2024, despite assurances of a potential comeback. Here’s a glimpse of the derivatives lawsuit:

“[A]s later admitted by Intel, and in breach of the individual defendants’ fiduciary duties, the true status of Intel’s affairs at the time were that: (1) IFS’s growth was not indicative of revenue growth reportable under its segment; (2) IFS experienced substantial operating losses in 2023;

(3) IFS experienced a decline in product profit driven by lower internal revenue; (4) due to the foregoing, IFS could not be a strong tailwind to Intel’s foundry strategy; and (5) the Company failed to maintain adequate internal controls.

– via The Register

As compensation, the shareholders demand an amount equivalent to what Intel’s former CEO and current CFO received in salaries and other benefits during the financial mismanagement. The lawsuit is currently being filed in federal court in San Jose, California, and interestingly, a similar case was already filed in August. Things aren’t looking good for Intel by any means, and with the firm already in a financial mud-pit, handling lawsuits means more trouble for them.

Intel’s former CEO and his ambitions with Intel Foundry are a talk for another day, but it seems like the optimistic approach towards the division is now starting to cost Team Blue, not just through these lawsuits but also since IFS hasn’t managed to bag in mainstream clients, despite the semiconductor demand being at all-time highs. Intel Foundry’s future looks gloomy, and a division sell-off might be imminent.