Intel has ousted CEO Pat Gelsinger on the weekend, capped a tumultuous nearly four-year tenure at America's top semiconductor company before its stock and market share collapsed.
The company announced Gelsinger's resignation Monday morning. An individual accustomed to the matter said it got here after a contentious board meeting last week over Gelsinger's alleged inability to answer Nvidia's competitive advantage and a insecurity in Gelsinger's turnaround plans.
Intel CFO David Zinsner and Intel Products CEO MJ Holthaus have been named interim co-CEOs. Long-time board member Frank Yeary will act as interim chairman. Shares of Intel fell 2% on Monday afternoon.
“We are working to create a leaner, simpler and more agile Intel,” Yeary said. Yeary was a key reason for Gelsinger's ouster, said the person, who requested anonymity to freely discuss confidential board negotiations. Intel didn’t immediately reply to a request for comment on the board meeting.
Yeary, Intel's longest-serving board member, must now lead one other CEO search process. Gelsinger, 63, had an illustrious profession at Intel, rising to change into the corporate's first chief technical officer on the turn of the century before taking a senior role at EMC. Gelsinger returned to the corporate from VMware, where he was CEO, to stabilize Intel in 2021, succeeding then-CEO Bob Swan.
“It has been a challenging year for all of us as we have made difficult but necessary decisions to position Intel for current market dynamics,” Gelsinger said in a press release.
The board meeting that led to Gelsinger's ouster was first reported by Bloomberg.
When Gelsinger arrived in 2021, he laid out a daring plan to rework the struggling company right into a chip-making juggernaut. He aimed to meet up with the 2 leading chipmakers, Samsung and Taiwan Semiconductor Manufacturing Co. He pursued major expansions within the United States and world wide, a costly undertaking that placed a severe strain on Intel's free money flow and increased the corporate's debt load.
He also courted government investment and positioned Intel as the only largest beneficiary of the US CHIPS and Science Act. Government money has flowed to Intel in recent weeks and can support the corporate's chip factories in Arizona and Ohio. Gelsinger's retirement comes every week after Intel and the CHIPS and Science Act Office finalized a $7.86 billion grant.
Gelsinger also positioned the corporate as vital to U.S. national security. He won a multibillion-dollar contract from the Defense Department to construct secure chips and emphasized in meetings with analysts and potential customers that Intel was a trusted partner of the U.S. government.
But none of that was enough to reassure investors, who increasingly viewed Intel's aggressive spending as folly.
Troubled tenure
Investors grew increasingly wary of Intel's prospects, especially because the wave of artificial intelligence buoyed the rival Nvidia and left Intel within the dust. The company's market cap is lower than half of what it was in 2021 and was briefly below $100 billion earlier this 12 months. The company's shares have fallen 52% for the reason that starting of the 12 months.
In August, Intel reported disappointing quarterly results that triggered its biggest selloff in 50 years and said it could lay off greater than 15% of its workforce as a part of a $10 billion cost-cutting plan. CNBC reported that Intel has hired consultants to defend itself against activist investors.
So far, there is no such thing as a indication that any activist has taken a major stake in the corporate's stock, neither is there any indication that overtures have been made to Intel's board. It is just not clear what agenda an activist would pursue inside the company.
Intel announced plans in September to convert the corporate's foundry business into an independent subsidiary, which might allow for external financing opportunities. That same month, Qualcomm made overtures to a possible acquisition.
Gelsinger's successor, once found, will take the helm of an organization that’s smaller and more sophisticated than ever before. Many of the issues Gelsinger faced were inherited: Failing to pursue a chip-making mandate for Apple's mobile devices and passing on an acquisition of Nvidia were just two of the reportedly conscious decisions made by Intel's previous leadership that put the corporate at a competitive drawback.
These decisions were made by Intel's board of directors and former CEOs. But Gelsinger's fall over the weekend raises latest questions on corporate governance. Lip-Bu Tan resigned from Intel's board earlier this 12 months, leaving the corporate with no directors with semiconductor expertise. In the weeks since, quite a few reports have emerged detailing a dysfunctional corporate acquisition strategy and boardroom resentment.
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