If chip maker resorts to naming an outsider, that would be a break from its history

By Jay Greene and Tripp Mickle 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (June 23, 2018).

Intel Corp. Chief Executive Brian Krzanich's abrupt resignation this week creates a quandary for the chip maker's board: Pick a successor from a thin bench of internal candidates, or turn the storied $243 billion company over to an outsider for the first time in its 50-year history.

Mr. Krzanich, who resigned Wednesday for violating company policy by having a relationship with a co-worker, had no clear successor. It has been years since the company has had a president or operating chief, stepping stones for some previous Intel CEOs.

Chief Financial Officer Robert Swan, who was named interim CEO on Thursday, told employees in a companywide videoconference that he wasn't interested in staying on as permanent CEO, according to one employee who watched the webcast.

Still, hiring an outsider would be difficult, people familiar with the company say. Intel is a semiconductor-industry leader with integrated design, manufacturing and marketing operations, and its culture is rooted in a belief it is superior to rivals because of its place in tech history.

"It's very hard to find someone given the incredibly high degree of technical complexity you have to deal with," one of these people said. "It's some of the most challenging rocket science in the world, and finding a CEO who can manage that is difficult."

Intel declined to comment on its CEO search.

The last time the CEO job was open was when Paul Otelleni, Mr. Krzanich's predecessor, surprised the board in November 2012 by announcing he would step down. Intel spent about six months searching for a new chief, weighing about five internal and five external candidates, according to one of the people, who was familiar with the search. Mr. Krzanich, then Intel's chief operating officer, was a candidate.

The executive recruiting firm Spencer Stuart assisted with the search, the people said. A Spencer Stuart spokesman declined to comment, saying Intel remains a client.

Mr. Krzanich was only the sixth Intel CEO. If the company hires an outsider, it would be a first for the company since its founding in 1968 by Robert Noyce and Gordon Moore.

New Street Research analyst Pierre Ferragu thinks Mr. Swan, who joined Intel 1 1/2 years ago from eBay Inc., could still stay on as CEO if the board were to ask. But if Intel goes outside, it might not have to look too far to find a familiar face, Mr. Ferragu said.

Two possible outside candidates, he said, are both former Intel executives: Pat Gelsinger, CEO of VMware Inc., and Diane Bryant, operating chief of Alphabet Inc.'s Google Cloud unit. As Intel alumni, they understand the culture but also can bring an outsider's perspective, Mr. Ferragu said.

Mr. Gelsinger and Ms. Bryant declined to comment.

Mr. Gelsinger in 2013 shot down speculation that he would be named Intel CEO, saying at the time he was "happy in my role at VMware and hope to be doing it for many years to come."

In a tweet responding to the suggestion that he get consideration as Mr. Krzanich's successor, Mr. Gelsinger wrote, "I love being CEO @vmware and not going anywhere else. The future is software!!!"

Another option is former Globalfoundries Inc. chief Sanjay Jha, who also once headed operations at Qualcomm Inc. and has been on the short list of executive candidates for Intel in the past, according to a person familiar with Intel's thinking. Mr. Jha, who left Globalfoundries early this year, declined to comment.

Intel's CEO void comes at a critical time, as the company is eager to extend its momentum. Its share price has risen 11% this year, outpacing the Nasdaq Composite Index. Intel recently reported record first-quarter revenue and profits.

But the company also is looking to regain its edge in design and manufacturing of the processors that have defined it for decades. The next CEO will have to deal with Intel's struggles in manufacturing its next-generation processors, as well as threats from rivals crafting specialized chips for new arenas such as artificial intelligence.

Given the complexity of the challenges, Intel's board is expected to favor an internal candidate, according to the people familiar with the company. But the board had pushed Mr. Krzanich to diversify Intel's leadership in recent years, these people said, contributing to a raft of senior departures. That has left Intel with a relatively short list of seasoned internal candidates, analysts say.

One of those candidates is Venkata M. Renduchintala, Intel's engineering chief, known as Murthy, who was recruited from Qualcomm in 2015. He oversees Intel's development of traditional processors and coming graphics chips meant to challenge Nvidia Corp.

Mr. Renduchintala, who is 52 years old, also has taken responsibility for manufacturing operations and has been implementing a plan developed by Mr. Krzanich to help Intel overcome production delays with its next-generation chips, according to one of the people familiar with Intel's leadership.

Another internal candidate, Navin Shenoy, oversees Intel's high-margin data-center business and before that ran its PC business, which are Intel's most dominant areas. Both businesses showed improved performance under his leadership, the people familiar with the company said.

The risk in choosing Mr. Shenoy would be that Mr. Renduchintala, seeing his path to CEO cut off, might head for the door, leaving Intel without his technical know-how, one of these people said. Mr. Shenoy, who at 44 is younger, could stay on even if not selected and look to ascend down the road, the person said.

Neither Mr. Shenoy nor Mr. Renduchintala replied to requests for comment.

--Ted Greenwald contributed to this article.

Write to Jay Greene at Jay.Greene@wsj.com and Tripp Mickle at Tripp.Mickle@wsj.com

 

(END) Dow Jones Newswires

June 23, 2018 02:47 ET (06:47 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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