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Intel Up as Hedge Fund Third Point Urges Review of Alternatives

Third Point called on Intel to evaluate alternatives to being an integrated device manufacturer. The chipmaker's shares are higher.

Shares of Intel  (INTC) - Get Intel Corporation Report rose Tuesday after hedge fund Third Point urged the chipmaker to assess strategic alternatives, including possibly separating its design and manufacturing arms, media reports suggested.

Shares of the Santa Clara, Calif., company at last check jumped 5.5% to $49.67.

In a letter to Intel Chairman Omar Ishrak that was obtained by Reuters, U.S. hedge-fund manager Daniel Loeb wrote that Intel needed to address its weakening position in microprocessor manufacturing against rivals in Taiwan and South Korea.

Tech giant Intel for its part said it welcomes input from all investors regarding enhanced shareholder value. "In that spirit, we look forward to engaging with Third Point LLC on their ideas towards that goal," the company said in a statement.

Loeb pointed to what he said was Intel's loss of market share to rivals in its core PC and data-center markets.

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Intel in October reported weaker-than-expected server CPU revenue and margin pressures.

“We suggest the board retain a reputable investment advisor to evaluate strategic alternatives, including whether Intel should remain an integrated device manufacturer and the potential divestment of certain failed acquisitions," a report in The Wall Street Journal said, citing the Third Point letter.

Third Point has a $1 billion stake in Intel, according to Reuters.

“Without immediate change at Intel, we fear that America’s access to leading-edge semiconductor supply will erode, forcing the U.S. to rely more heavily on a geopolitically unstable East Asia to power everything from PCs to data centers to critical infrastructure and more,” the Reuters report quoted the letter as saying.

Intel, which both designs and builds its own chips, said this year that it would consider outsourcing the manufacturing of some of its most advanced chips, TWSJ reported. The company is expected to decide soon where it will make future generations of processors.

Earlier in December, shares of Intel fell after software giant Microsoft  (MSFT) - Get Microsoft Corporation Report said it was working on making its own processors to use in its servers that run the company’s cloud services.