The retirement of Intel CEO Pat Gelsinger has left more questions than Intel answered in its statement regarding his departure.
Intel in the past had a measured process of ascension for future CEOs. A candidate would be anointed president and COO, reporting to the CEO, usually two years in advance of getting the big job. This led to an orderly transition of power after Paul Otellini’s tenure, for example. But transitions have been less orderly for the last few CEOs.
Gelsinger’s exit was announced yesterday, and the company named two interim co-CEOs while it searches for a long-term replacement. The two co-CEOS are David Zinsner, who currently serves as CFO, and Michelle Johnston Holthaus, who is adding the data center, AI, network and edge groups to her existing responsibility for client computing in the newly created role of CEO of Intel Products.
The fact that Gelsinger is leaving with no successor named indicates this was a decision made on short notice, which means everyone within Intel, not just in the C-suite, is scrambling.
“It’s a scary omen,” said Jim McGregor, principal analyst with Tirias Research. “We don’t know what’s going to happen with any of the projects. Intel is at a critical point in its transformation and this leaves a lot up in the air.”
There are a lot of decisions that need to be made in terms of product strategy and fab strategy. Whoever steps into the CEO role has to decide if Gelsinger’s vision for Intel – to be competitive in the chip fabrication business with TSMC as well as leading chip design – will continue or change.
Intel’s IDM 2.0 strategy involves a massive investment in fabrication and going into third-party fabrication business, rather than just keeping its fabs for itself. Essentially, Intel is trying to turn itself into TSMC with the chip business on the side. This requires enormous financial investment – $40 billion and counting. And it was definitely Gelsinger’s vision.
So, one of the first decisions a new CEO will have to make is whether or not to continue on this road or scale back. McGregor says that’s the best place to cut, because the product side is already pretty lean and mean, and any cuts would hamper it.
“One would think [IDM] could be scaled back,” he said. “The fab plan was aggressive and there is no way the industry could absorb all the fabrication capacity that Intel had planned. If anything gets scaled back, it would be the fab strategy.”
IDM 2.0 was a very long-term strategy – five years or more before it would see profitability. Jack Gold, president of J.Gold Associates, thinks the board of directors ran out of patience and elbowed Gelsinger out.
“This is a pretty major realignment for Intel Corporation and an indication the board of directors did not like the style or substance of his continued leadership, nor the recent revenues/losses as the turnaround is taking longer and more challenging than expected,” he said in a research note.
“I don’t think that Pat Gelsinger did a bad job of ‘kicking some butt’ to get Intel out of its complacency, which it had been in for many years before his arrival. And that was a good thing. But it’s taken far longer to get the ship sailing in the right direction and after three-plus years or so of trying, I think the BOD just wanted more success, so finally it just said we need to change direction and let him go,” he added.
Alvin Ngyuen, senior analyst with Forrester Research, thinks that IDM’s days could be numbered. “The push for Intel to spin off the foundry business has been strong. This could be a concession that Intel has to make for investors since the length of time to see an ROI is long and the risk of failure may be higher than they like,” he said.
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