Intel Plans to Separate Networking Unit into Stand-Alone Company, Taps Investors

Intel plans to separate its networking and communications unit into a standalone company, with the new CEO focusing on streamlining operations and shedding non-core assets. The company has initiated the process of identifying investors, with Ericsson in talks to invest millions in Intel's networking infrastructure business. Intel aims to simplify its business, reduce expenses, and improve profitability.

Intel Corp. has announced plans to spin off its Network and Edge Group (NEX) into a standalone company, marking a strategic shift under the leadership of new CEO Lip-Bu Tan. The move is part of Intel’s broader efforts to streamline operations and focus on its core areas of PC and data center chip production.

The NEX unit, which generated $5.8 billion in revenue in 2024, will be restructured as an independent entity, with Intel retaining an anchor investor role. This separation aligns with Tan’s strategy to divest non-core assets and reduce costs following a challenging financial period. In the second quarter of 2025, Intel reported a loss of $2.9 billion and announced plans to cut 15% of its global workforce.

Intel’s Network and Edge Group has been responsible for developing silicon solutions aimed at critical communications, enterprise networking, and Ethernet connectivity infrastructure. By spinning off the division, Intel aims to enable the new business to operate with greater agility and focus, while Intel redirects its resources towards strengthening its leadership in PC and data center markets.

Tan’s leadership marks a clear pivot back to Intel’s traditional strengths after a period of diversification and expansion into broader semiconductor areas. Earlier this year, Intel sold a majority stake in its Altera programmable chip business to private equity firm Silver Lake for $8.75 billion, reflecting a continued drive to shed less central operations.

The spin-off is also seen as a way for Intel to reduce direct competition with major players like Nvidia in the communications chip sector. Rather than replicating hyperscaler strategies, Intel is prioritizing markets where it can leverage its expertise more effectively.

Intel is actively seeking strategic investors to support the NEX spin-off and is in the process of identifying potential partners. The company’s goal is to position the new entity as a leader in delivering networking and edge silicon solutions globally.

Industry analysts view this restructuring as a significant step for Intel to refocus amid a fast-evolving semiconductor landscape. By concentrating on core competencies and forming strategic partnerships, Intel aims to drive growth and innovation while managing costs effectively.

Ericsson AB, a Swedish telecom equipment maker, is in talks to invest hundreds of millions of dollars in Intel’s networking infrastructure business. The investment would make Ericsson a minority stakeholder in the newly spun-off networking and edge business known as NEX. Intel has held talks with other potential investors to join Ericsson in taking a stake in the business.

Intel’s latest earnings call presented a mixed sentiment, reflecting both positive achievements and significant challenges. The company reported strong revenue performance and progress in its organizational restructuring and foundry strategy. However, concerns were raised about managing gross margins, facing competition in the server business, and dealing with CapEx constraints, leading to a cautiously optimistic outlook.

References:
[1] https://www.capacitymedia.com/article-intel-to-spin-off-network
[2] https://www.ainvest.com/news/intel-plans-spin-network-edge-business-seeking-investors-2507/
[3] https://www.bloomberg.com/news/articles/2025-07-31/ericsson-in-talks-to-invest-in-intel-standalone-network-business
[4] https://www.theglobeandmail.com/investing/markets/stocks/INTC/pressreleases/33728104/intels-earnings-call-revenue-surges-amid-challenges/