INTC Intel Corporation

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)

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