Intel CEO Gelsinger ousted as board loses confidence in reform strategy

Intel CEO Pat Gelsinger was forced to resign after less than four years at the helm, handing control to two deputies as the crumbling U.S. chipmaking icon searches for a permanent replacement .

Gelsinger resigned on Dec. 1, following a board meeting last week in which directors concluded Gelsinger’s costly and ambitious plan to turn around Intel wasn’t working, according to a person familiar with the matter. , and change is not happening fast enough. . According to sources, the board told Kissinger he could retire or be removed, but he chose to resign.

His departure comes ahead of the completion of his four-year roadmap to restore the company’s leadership in making the fastest and smallest computer chips, a crown it lost to TSMC, which produces for Intel rivals such as Nvidia chip.

Under Gelsinger, Intel, founded in 1968 and a cornerstone of Silicon Valley’s global chip dominance for decades, is now worth more than 30 times less than Nvidia, the leader in artificial intelligence chips.

Bloomberg earlier reported Kissinger’s retirement.

Kissinger, 63, assured investors and U.S. officials who are bankrolling Intel’s turnaround that his manufacturing plans remain on track. But the full results won’t be known until next year, when the company aims to bring flagship laptop chips back to its own factories.

The company’s shares rose 4.1%. The stock has lost more than half its value this year and was replaced by Nvidia on the blue-chip list of the Dow Jones Industrial Average last month.

The company named Chief Financial Officer David Zinsner and Senior Executive Michelle Johnston Holthaus as interim co-CEOs while the board searches for a new CEO. It comes less than a week after U.S. officials provided $7.86 billion in subsidies to Intel.

The board has established a committee to find Kissinger’s successor.

Independent Chairman Frank Yeary said: “While we have made significant progress in restoring manufacturing competitiveness and building the capabilities to become a world-class foundry, we know the company still has much work to do and are committed to restoring investor confidence. ” the board said in a press release.

Intel communications chief Karen Kahn also plans to leave the company, according to two people familiar with the matter.

consumption frenzy

Gelsinger announced his turnaround plan in July 2021 as the company, already plagued by years of manufacturing missteps, embarked on a spending spree. The company has begun building a new $20 billion factory in Ohio and is employing 132,000 people, more than Intel maintained during its time as the largest player in the chip industry.

But the spending coincided with the post-pandemic collapse of the laptop and PC markets, which in turn left Intel’s gross margins well below historical levels and depressed its stock price, sparking takeover interest in the company.

The spending eventually forced Kissinger to propose a series of layoffs and potential asset sales and spin-offs.

“The stock has fallen more than 60% during his tenure, so this shouldn’t be a huge surprise,” said Ryan Detrick, chief market strategist at investment advisory firm Carson Group. “

“New leadership is needed to turn things around and it’s safe to say that any major strategic decisions he makes will be under consideration, including a focus on becoming a contract manufacturer.”

Gelsinger also failed to provide an effective AI chip challenger to Nvidia, which has begun its march toward becoming a $3 trillion company by powering services like ChatGPT.

“At the end of the day, you need leading products, innovation and execution, and we didn’t see any of that during Pat Kissinger’s reign,” said Hans Mosseman, an analyst at Rosenblatt Securities.

Intel’s foundry ambitions waver as Gelsinger’s turnaround plan flounderes

Gelsinger’s turnaround plan focuses on Intel becoming a major player in contract manufacturing for other companies, a business model known in the chip industry as “foundry.” Intel has announced a handful of foundry customers, including Microsoft and Amazon, but neither company will bring the large number of chips to Intel’s factories needed to ensure the factories are profitable.

Crazy spending, combined with a lack of substantive progress at the company’s foundries, led to tensions among the board of directors, leading to the resignation of board member Lip-Bu Tan over differences of opinion. Strategy with Kissinger.