By Jay Greene and Aisha Al-Muslim
Intel Corp. Chief Executive Brian Krzanich resigned over
violating company policy for having a consensual relationship with
a co-worker, a sudden turn for the tech giant as it seeks to extend
its dominance in PC chips into new frontiers in computing.
Mr. Krzanich's exit makes him one of the most prominent CEOs to
lose a job in an era of greater scrutiny over workplace
relationships. His departure comes at a transformative time for
Intel, which under Mr. Krzanich swallowed its two biggest
acquisitions as it tries to expand into arenas such as artificial
intelligence and advanced automotive technologies.
Mr. Krzanich couldn't be reached for comment.
Intel is fending off threats to its dominance from chip makers
such as Nvidia Corp., whose graphics chips are powering some of the
fastest computers in the world.
The board said Thursday finance chief Robert Swan would become
interim CEO, effective immediately. Mr. Swan previously served as
eBay Inc.'s CFO. The board considers him a skilled finance chief
who has played a critical role in improving the company's
profitability since joining Intel in 2016, a person familiar with
the matter said.
Intel, which dealt with the sudden departure of its CEO in 2012
when Paul Otellini announced plans to step down, has begun an
internal and external search for a new leader.
Intel said a continuing investigation by internal and external
counsel confirmed a violation of the company's non-fraternization
policy, which applies to all managers. Intel said it accepted Mr.
Krzanich's resignation Wednesday.
His exit comes as companies wrestle with what constitutes
appropriate relationships in the workplace. Intel prohibits
managers from having sexual or romantic relationships with direct
or indirect reports, a spokesman said.
The policy is a "hard ban" that applies to all managers
regardless of seniority level, the spokesman added. The company
said it expects all employees to respect Intel's values and adhere
to its code of conduct, and its policy requires employees who see
or believe someone acted inappropriately to raise their concerns
immediately, he said.
Intel's shares fell 2.3% to $52.23 in afternoon trading in New
York. Along with the CEO news, the chip maker provided a
better-than-expected financial outlook for the current quarter.
Mr. Krzanich's sudden exit is the latest high-level departure
for the company.
Diane Bryant, former head of Intel's data-center group, joined
Google's cloud business late last year. Stacy Smith, Intel's
onetime finance chief who later headed up manufacturing, also left
last year after three decades with the company. Kirk Skaugen,
former head of client computing who was at one point seen as a CEO
candidate, left the company in 2016 and is now with Lenovo Group.
Renee James, Intel's former president, left in 2015.
"We fail to see a clear internal long-term successor given
recent changes to senior management," analysts at Cowen & Co.
said in a research note Thursday. "However, given so much change
driven by Mr. Krzanich, his departure could make succession
planning and further transition challenging."
While details of the relationship weren't disclosed Thursday,
the public resignation highlights the discussions happening in
workplaces around the country over how employers should regulate
office romances.
Dating policies at U.S. companies vary. Some employers don't
allow senior managers to have relationships with co-workers, even
if they are not direct reports. The idea is that even if a manager
doesn't directly oversee an employee, they may have more power
within the organization. Other companies have no issue with
consensual relationships but have asked for them to be disclosed.
Still others have no dating policy at all.
Some companies have been revamping their rules around workplace
relationships in the wake of the #MeToo movement. Intel, like many
other technology companies, has said it was working to increase
gender and racial diversity in its workplace. In its 2017 diversity
report, the company said 73.5% of its total workforce was male.
Mr. Krzanich joins other CEOs who left following allegations of
relationships with employees, including Harry Stonecipher, who left
as CEO of Boeing Co. in 2005; Steven Heyer, who left Starwood
Hotels & Resorts Worldwide Inc. in 2007; and Christopher
Kubasik, who was the CEO-in-waiting when he left Lockheed Martin in
2012.
Mr. Krzanich started at Intel in 1982, rising through a series
of technical and leadership roles to become chief executive in
2013. He set about a broad effort to diversify the company's
offerings beyond its stronghold in processor chips for personal
computers, a market in which Intel holds a more than 90% share,
according to Mercury Research, leaving it scant room to grow as PC
shipments decline.
Intel's strength in processing chips has come under pressure as
graphics processors, primarily from Nvidia, emerged as a workhorse
for artificial intelligence. Intel in 2016 sought to address that
market by buying Nervana Systems and Movidius, a pair of startups
working on AI-focused chips. It recently launched an effort to make
graphics chips to better compete with Nvidia.
Intel became more acquisitive under Mr. Krzanich. He built out
Intel's business in data-center servers, supplying companies such
as Amazon.com Inc. and Microsoft Corp. that are spending billions
annually on cloud-computing facilities. A big chunk of that growth
came from Intel's $16.7 billion deal for Altera Corp. in 2015 --
the company's biggest-ever acquisition.
Mr. Krzanich followed up his Altera buy with a big bet on the
booming market for automotive-vehicle technology by spending $15.3
billion for Mobileye NV, a leader in sensors for assisted-driving
features.
Mr. Krzanich also sought growth in others areas, beefing up
Intel's position in outfitting a variety of household and
industrial equipment with computing capabilities, a burgeoning
business known as the Internet of Things. Intel also has made a
push in the market for cellular-communications chips, replacing
Qualcomm Inc. units in a portion of Apple Inc.'s iPhones, and has
made inroads on 5G cellular technology.
Mr. Krzanich also pushed Intel into visibly high-profile areas
such as augmented-reality headsets and competitive gaming known as
esports. Some of these efforts fell short; Intel, for instance,
shut down several products designed for wearable computing, such as
smartwatches.
In recent months, Mr. Krzanich has emerged as a leading
proponent of the commercial drone industry, primarily by publicly
championing the company's technology and serving as chairman of a
high-level federal aviation advisory committee.
Since being named CEO, Intel's share price has risen 123%,
outpacing the S&P 500 but underperforming the PHLX
Semiconductor Sector Index. Sales have grown nearly 18% between
2012 and 2018 to $62.76 billion. Last year, Intel held a 99% share
of the most popular type of chips used in servers, and a 91% share
of the processors found in PCs, according to Mercury Research.
The company also released a financial forecast that was above
analyst expectations. For the current second quarter, the company
expected adjusted earnings of 99 cents a share and revenue of $16.9
billion. Analysts polled by FactSet had expected adjusted earnings
of 86 cents a share and revenue of $16.3 billion.
--Tripp Mickle contributed to this article.
Write to Jay Greene at Jay.Greene@wsj.com and Aisha Al-Muslim at
aisha.al-muslim@wsj.com
(END) Dow Jones Newswires
June 21, 2018 15:06 ET (19:06 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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