Intel to spin off networking business in cost-cutting gambit
In a familiar move, the semiconductor giant's Networking & Edge Unit will operate independently with Intel's backing.
Intel Corp. has confirmed plans to spin off its Networking & Edge Group as the beleaguered semiconductor giant makes a comeback bid centered on core businesses.
The move, first reported by CRN, aligns with Intel CEO Lip-Bu Tan's effort to focus on the company's core CPU business and AI initiatives, which have lost considerable data center market share in recent years.
CRN cited an internal memo from Sachin Katti, senior vice president and general manager for NEX. In that memo, he said the spun-out company would be an "independent entity focused exclusively on delivering leading silicon solutions for critical communications, enterprise networking and ethernet connectivity infrastructure."
Intel plans to remain a primary investor and will look for partner investors for the standalone business, according to spokesperson. Earlier this year, the company took similar steps with its programmable logic division Altera.
Spinning out divisions enables Intel to capitalize on future gains. For example, it added $922 million to its balance sheet this month when it sold 57.5 million shares of its Mobileye business, which Intel acquired in 2017 and spun out in an IPO five years later.
"This is demonstrating that Lip-Bu is executing on the strategy that was outlined back in April -- that he wants to take Intel in a direction where they can play to their core strengths," said Ron Westfall, an analyst with HyperFrame Research. "That means streamlining Intel … NEX was a prime candidate."
After Intel's second quarter 2025 earnings last week showed flat but better-than-expected revenue along with a $2.9 billion net income loss, Tan said massive cost-cutting efforts would continue -- including reducing the global headcount to 75,000.
Intel's NEX steps
Intel formed its networking and edge business as a division in 2021 under then-CEO Pat Gelsinger to address growing market opportunities in network infrastructure, edge computing and telecommunications.
NEX's enterprise customers use Intel's FlexRAN reference architecture and edge AI hardware. The portfolio supports cloud-native 5G deployments, virtualized RAN (vRAN) infrastructure as well as many AI-at-the-edge applications.
NEX faced stiff competition in networking infrastructure and edge computing from Nvidia, Broadcom, Marvell and others. The unit posted promising results in 2022, contributing $8.9 billion in revenue. But in the next few years, growth slowed for NEX.
"NEX [will be] able to have its own distinct identity and message to pursue partnerships … that might have been difficult from within the overall Intel organization," Westfall said. "So, I would say this is a net positive, but we'll need to see more details."
Jim Frey, an analyst at Enterprise Strategy Group, now part of Omdia, said Intel's decision to spin out its networking and edge unit might have been a little hasty.
"To be honest, it seems rather short sighted to say that networking is not part of an AI-first strategy," he said, adding that AI needs are sparking more demand for networking and edge products.
"It's interesting to watch how Intel is trying to reinvent themselves and they've stated that their strategy is to focus on AI first," he said. "We still need the same capabilities. We still need networking. We still need ethernet to communicate between the different components."
Shane Snider, a veteran journalist with more than 20 years of experience, covers IT infrastructure at Informa TechTarget.
