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SpinOff Networking Business

Exclusive: Intel Reveals Plan To Spin Off Networking Business In Memo


In a memo to customers, Intel says it will spin off the Network and Edge Group into a stand-alone business that is ‘focused exclusively on delivering leading silicon solutions for critical communications, enterprise networking and ethernet connectivity infrastructure.

Intel Thursday revealed its plan to spin off its Network and Edge Group in a memo addressed to customers and said it will seek outside investment for the business unit. The memo, seen by CRN, was authored by Sachin Katti, who has led the Network and Edge Group, shortened as NEX, since early 2023. He was given the extra role of chief technology and AI officer by Intel CEO Lip-Bu Tan in April to lead the chipmaker’s AI strategy.

An Intel spokesperson confirmed the contents of the memo to CRN. “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 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.

[Related: RealSense Almost Died At Intel. Now It’s Spinning Out With $50M In Funding.]


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,” he said in a statement.

In Katti’s memo, he said Intel “internally announced” on Thursday 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. 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. “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.

Shortly after Tan became Intel’s CEO in March, the leader made clear that he would seek to spin off businesses he considers not core to its strategy. Then in May, Reuters reported that the company was exploring a sale of the NEX business unit as part of that plan. While Tan didn’t reference Intel’s decision to spin off NEX in the company’s Thursday earnings call, he discussed other actions it has taken to monetize “non-core assets,” including the sale of a portion of Intel’s stake in Mobileye earlier this month.

The company is also expected to complete its majority stake sale of the Altera programmable chip business to private equity firm Silver Lake by late September, according to Tan. Silver Lake will gain a 51 percent stake in the business while Intel will own the remaining 49 percent. “I will evaluate other opportunities as we continue to sharpen our focus around our core business and strategy,” Tan said on the earnings call.

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