A derivative lawsuit alleges that Intel's leadership mishandled the company's foundry business, leading to substantial losses and misleading shareholders.
Beleaguered chipmaker Intel has been sued yet again by shareholders over its foundry business, this time in a derivative lawsuit targeting executives and board members. The lawsuit, brought by investors on behalf of the company, which receives any damages awarded as a result of the litigation, was filed in federal court in San Jose, California.
It accuses two corporate officers – former CEO Pat Gelsinger and interim co-CEO/CFO David Zinsner – and various board members of violating securities law and their fiduciary duties, unjust enrichment and wasting corporate assets. It seeks restitution and punitive damages from the individual defendants that, if awarded, would be paid to Intel, plus court costs for the attorneys representing the plaintiff, LR Trust. For that reason, the legal filing lists the recent compensation of the named defendants, such as the combined total of more than $207 million awarded to Gelsinger in 2021, 2022, and 2023. In October 2022, Intel announced that it would pursue an internal foundry model, a reflection of the company's strategic shift toward making chips both for itself and external customers. In June 2023, the chip biz said Intel Foundry Services (IFS) would begin reporting its own profits and losses starting in Q1 2024. And on April 2, 2024, the chip maker revealed that IFS had an operating loss of $7 billion on sales of $18.9 billion in 2023. Fine print in Intel's CHIPS Act deal includes a requirement to keep control of its foundries. Then in Q2 2024, the company reported an IFS operating loss of $2.83 billion, substantially worse than the foundry businesses' $1.87 billion operating loss in Q2 2023. The disappointing quarter was as evidence that executives and board members failed to meet their obligations to shareholders and allowed the company to make false and misleading statements about its financial prospects
Intel Foundry Lawsuit Shareholders Financial Losses
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