By Nina Trentmann
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 (April 5, 2019).
Intel Corp.'s move to hire an outsider as finance chief is the
latest step in the transformation of a company that historically
relied on promoting homegrown talent and comes as the chip maker
shifts its focus to data.
The Santa Clara, Calif.-based company on Tuesday named George
Davis chief financial officer, effective Wednesday. Mr. Davis joins
Intel from Qualcomm Inc., where he served as finance chief for the
past six years. Intel's CFO post had been vacant since Jan. 31,
when former finance chief Bob Swan became chief executive.
Intel has increasingly turned to outside candidates when filling
top vacancies in recent years, a break from its longstanding
preference for internal talent. Last year, the company hired Jim
Keller, who had overseen Tesla Inc.'s autopilot program, to become
senior vice president in the technology, systems architecture and
client group. In 2017, Intel recruited Raja Koduri for the chief
architect role from Advanced Micro Devices Inc.
And Mr. Swan himself joined the company in 2016 as the first
outsider finance chief since 1983, having previously served as CFO
at several companies, including a nine-year stint at eBay Inc.
Intel's chief engineering officer, Venkata Renduchintala -- like
the new CFO -- came from Qualcomm.
"It is no longer the old Intel anymore that we are used to,"
said Ambrish Srivastava, an analyst at BMO Capital Markets. "The
company has shown a lot of willingness to look at talent from the
outside," he said.
Intel is betting that external executives will bring new ideas
and fresh ways of thinking to help propel the company's
transformation, analysts said. The company's focus is moving beyond
its former breadwinner, processors for personal computers, to
making chips that can tackle how consumers and businesses produce
and use data across new and growing areas, including cloud
computing and the Internet of Things.
This requires a change in the way Intel's employees perceive the
company and its mission. Whereas Intel has for years dominated the
personal-computer and data-center market, it is one of several
players, and often the underdog, in the new markets the company is
targeting.
Intel's pivot comes as demand for PCs is falling. Global
shipments declined 4% during the fourth quarter year over year,
according to research provider Gartner Inc.
And Intel's 10-nanometer technology for more powerful computer
chips faces significant development challenges.
By contrast, Intel's focus on data is helping drive growth. At
the biggest segment of Intel's data-centric businesses, the Data
Center Group, revenue increased 21% last year to $23 billion,
according to the company's latest earnings release.
Still, PC chips and other computing products generated more than
half of Intel's operating profit and revenue in its latest
financial year, its financial records show.
Intel's new CFO, Mr. Davis, is expected to follow the path laid
out by CEO Mr. Swan, including a strong focus on free cash flow,
capital discipline and operating expenses, analysts said.
That sentiment was echoed by Mr. Swan. "Our owners can expect a
continued disciplined approach to capital allocation and a
relentless focus on creating stockholder value," he said in a
statement announcing Mr. Davis's appointment on Tuesday.
A spokeswoman for Intel declined to comment beyond Mr. Swan's
statement.
Mr. Swan cut the company's operating expenses and freed up
capital that went into new products, said Kevin Cassidy, an analyst
at Stifel Financial Corp. As Mr. Davis takes over, he could further
slash Intel's marketing spending, which in the past promoted the
company's chips alongside various PCs, Mr. Cassidy said.
"You rarely see makers of semiconductors advertise to
end-customers," Mr. Cassidy said, adding that the company recently
reduced this type of spending.
Mr. Davis's tenure at Qualcomm, which focuses on processor chips
for mobile devices, a market where Intel is a fringe participant,
was marked by significant challenges. These include the company's
continuing patent fight with Apple Inc. over royalty payments, an
unsuccessful attempt to acquire NXP Semiconductors NV and a f ailed
takeover attempt by Broadcom Inc.
Qualcomm stock is down 13% compared with where shares traded
when Mr. Davis became CFO in March 2013. Over that period, Qualcomm
also has underperformed the S&P 500 by 98% and lagged behind
Intel by 165%, according to Stacy Rasgon, a managing director at AB
Bernstein. "Most Qualcomm investors have been very frustrated with
the management," Mr. Rasgon said.
Qualcomm on Tuesday named David Wise, its senior vice president
and treasurer, as interim CFO while the company searches for a
permanent successor for Mr. Davis.
A Qualcomm spokeswoman declined to comment beyond the company's
Tuesday news release.
With the advance of 5G internet, Intel and Qualcomm could become
direct competitors, as both companies push to develop products for
this type of superfast broadband. Both companies are also targeting
demand for processing units from car makers, another avenue of
potential growth, and have, in some instances, moved into each
other's turf.
"The overlap between the two is relatively small and the market
is big enough for both to grow," said Timothy Arcuri, a managing
director at UBS Investment Research.
Write to Nina Trentmann at Nina.Trentmann@wsj.com
(END) Dow Jones Newswires
April 05, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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