By Asa Fitch
Intel Corp. ousted Chief Executive Bob Swan in a surprise move
after activist hedge fund Third Point LLC urged sweeping changes to
revive the semiconductor giant's fortunes.
Intel on Wednesday said Mr. Swan would be replaced by VMware
Inc. chief Pat Gelsinger effective Feb. 15. Mr. Gelsinger, who was
once Intel's technology chief, has served as CEO of the
business-software provider since 2012.
The leadership transition unfolds after Intel last year ceded
the title as America's most valuable semiconductor company to rival
Nvidia Corp. and suffered market-share losses. The Santa Clara,
Calif.-based company is also considering a broader embrace of
third-party chip makers rather than relying on its own
Mr. Swan joined Intel in 2016 as chief financial officer. He was
named interim CEO two years later and formally given the top job in
Third Point Chief Executive Daniel Loeb in a December letter to
Intel Chairman Omar Ishrak said the company's woes could undermine
the U.S. tech industry and urged the chip maker to consider
alternatives. That included selling some of its acquisitions and
splitting its design and manufacturing operations -- a move that
would end Intel's long-held status as America's leading integrated
"After careful consideration, the Board concluded that now is
the right time to make this leadership change to draw on Pat's
technology and engineering expertise during this critical period of
transformation at Intel," Mr. Ishrak said in a statement.
Intel shares rose more than 8% in morning trading.
Intel disclosed the CEO change just before the window closed for
nominations to its board, potentially heading off a public fight
with Third Point. Intel said its leadership change wasn't driven by
Mr. Loeb welcomed the move. "Swan is a class act and did the
right thing for all stake holders stepping aside for Gelsinger," he
said on Twitter.
Third Point's action came at the end of a year that saw Intel
shares retreat while the stock in rivals soared. Nvidia now has a
market capitalization about $100 billion higher than Intel's.
During the year, Intel suffered more product delays and lost market
share to Advanced Micro Devices Inc., once a distant rival. Intel
also was dumped by Apple Inc. as the supplier for its Mac computer
Intel has fallen behind Taiwan Semiconductor Manufacturing Co.
and South Korea's Samsung Electronics Co. in the race to make the
most cutting-edge chips. TSMC makes chips under contract for some
Intel competitors, including Nvidia and AMD.
Intel last year said it would consider outsourcing the
manufacturing of some of its most-advanced chips. The company
signaled it would provide an update on its plans next week when it
posts financial results.
Despite the setbacks, Intel has said it expects to post record
sales for 2020, boosted by pandemic-era demand for PCs and cloud
computing. Intel shares retreated around 17% last year when the
stock in many of its rivals soared.
Third Point has said it has a roughly $1 billion stake in Intel.
In its letter, Mr. Loeb said Intel had made acquisitions that
failed and that the company's board had allowed management to
"fritter away" advantages. "Stakeholders will no longer tolerate
such apparent abdications of duty, " Mr. Loeb wrote. He also
expressed concern Intel was losing chip design talent.
The U.S. has become increasingly concerned about losing its
technology edge, particularly in chip-making, in a tech Cold War
playing out against China. American lawmakers last year moved to
help finance domestic chip-making capacity.
Many analysts and investors had been clamoring for a stronger
engineering background among Intel's leadership given its
technology struggles. All but one member of the company's board of
directors lacks significant semiconductor technology expertise.
"With a true operator and technologist now at the helm of
Intel," Evercore ISI analyst C.J. Muse said in a note, "the odds of
success are now greatly improved,"
Mr. Gelsinger has previously been linked to the Intel CEO role.
In 2013, when the company was hunting for a new boss, Mr. Gelsinger
said he was flattered to be considered but wanted to remain at
VMWare. When the job came open again, prompting speculation he
would be tapped, Mr. Gelsinger tweeted he wasn't leaving VMWare and
that "the future is software!!!"
In an email to Intel employees Wednedsay, Mr. Gelsinger said:
"To come back 'home' to Intel in the role of CEO during what is
such a critical time for innovation, as we see the digitization of
everything accelerating, will be the greatest honor of my
Mr. Gelsinger led VMware to steadily rising sales, roughly
doubling them during his tenure there. The company became part of
Dell Technologies Inc. in 2016 with Dell's acquisition of EMC Corp.
He also forged partnerships with Amazon.com Inc. and others to
profit from the growth of cloud computing.
Palo Alto, Calif.-based VMware said finance chief Zane Rowe
would serve as its interim CEO while it conducts a search for a
permanent replacement for Mr. Gelsinger.
For Mr. Gelsinger, the move marks a return to a company where he
spent most of his career. He joined Intel in 1979 and had a
three-decade run. In 2001, the company made Mr. Gelsinger its first
chief technology officer. He is an electrical engineer with a
master's degree from Stanford University.
He will be Intel's eighth chief executive since the company's
founding in 1968 by Robert Noyce and Gordon Moore, whose prediction
about the pace of advancement in semiconductors, known as Moore's
Law, has powered one of the greatest economic advancements in world
Still, Mr. Gelsinger is not expected to deliver overnight
success, Bernstein Research analyst Stacy Rasgon said in a note.
Reversing Intel's market-share losses and fixing technological
problems will take time, he said.
With his departure, Mr. Swan will become Intel's
shortest-tenured chief. His predecessor, Brian Krzanich, was in the
role for about five years before his ouster amid what the company
described as a past consensual relationship with an employee that
violated its policies.
Intel said when it posts fourth-quarter earnings next week that
sales and per-share earnings would top the guidance it issued in
October. It also said it has made progress in developing its newest
generation of chips, an area where it had struggled.
Write to Asa Fitch at firstname.lastname@example.org
(END) Dow Jones Newswires
January 13, 2021 12:13 ET (17:13 GMT)
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