INTC Intel Corporation

By Austen Hufford and Aisha Al-Muslim 

Intel Corp. Chief Executive Brian Krzanich resigned after the company determined he violated company policy by having a past, consensual relationship with an Intel employee.

The company said that a continuing investigation by internal and external counsel confirmed a violation of Intel's non-fraternization policy, which applies to all managers.

Intel said it accepted Mr. Krzanich's resignation on Wednesday. The company said it expects all employees to respect Intel's values and adhere to its code of conduct. Mr. Krzanich couldn't be reached for comment.

Intel has a longstanding, non-fraternization policy that prohibits managers from having sexual or romantic relationships with employees who report directly or indirectly to them, a spokesman for the company said. The spokesman called the policy a "strict" and "hard ban" that he said applies to all managers regardless of seniority level. The policy also requires that employees who see or believe someone acted inappropriately to raise their concerns immediately, he said.

The board said Chief Financial Officer Robert Swan would become interim CEO, effective immediately. Mr. Swan joined Intel in 2016 after being CFO of eBay Inc. Intel has started a search for a permanent leader and is considering internal and external candidates.

Intel's shares fell 2% to $52.50 in late-morning 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 follows a string of high-level departures at 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 namely," 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 Corp., 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.

--Ted Greenwald, Tripp Mickle and Andy Pasztor contributed to this article.

Write to Austen Hufford at austen.hufford@wsj.com and Aisha Al-Muslim at aisha.al-muslim@wsj.com

(END) Dow Jones Newswires

June 21, 2018 13:14 ET (17:14 GMT)

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