Intel CEO Swan to be replaced by VMWare CEO Gelsinger

 

Intel CEO Bob Swan is stepping down on Feb. 15, according to a statement from Intel early Wednesday. The Intel board appointed VMWare CEO Pat Gelsinger, a 40-year technology veteran, to replace Swan.

Swan took the reins in January 2019 after a seven-month period as interim CEO.

Intel said Swan’s departure is not related to Intel’s 2020 performance, noting that the company expects fourth quarter revenues to exceed prior guidance from October. Also, Intel has made “strong progress on its 7nm process technology,” the company said.  The company promised more updates at its Jan. 21 earnings call on its full fourth quarter and 2020 results.

Despite such assurances, Intel has suffered problems under Swan and has lost market share to competition such as AMD, Samsung and TSMC.  In one example, Apple announced last fall it would use its own chips in Mac computers instead of long-time supplier Intel.

 Concerns have also arisen that Swan didn’t have a technical background like Gelsinger has.   Swan was previously the CFO at Intel, while Gelsinger worked at Intel for 30 years and served as Intel’s first Chief Technology Officer.   He has served as VMware CEO since 2012, where he oversaw a near tripling of the company’s annual revenues.

“Pat is a proven technology leader with a distinguished track record of innovation, talent development and deep knowledge of Intel,” board chairman Omar Ishrak said in a statement. “He will continue a values-based cultural leadership approach with a hyper focus on operational execution.”

Iskrak added: “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 time of transformation at Intel.”

Swan said in a statement that the company was at the “right juncture” to transition to a new leader.

Intel finished 2019 as the top revenue producing semiconductor company globally, at $71 billion.   But 2020 was more challenging,   For the third quarter, Intel saw data centric chip sales decline by 7% over a year earlier, hitting $5.91 billion in revenue.  Overall revenues hits $18.3 billion, down 4% from a year earlier.  Net income for the third quarter was $4.3 billion, down 29%.  The third quarter losses resulted in a steep decline in Intel shares to $48.91 on October 26.

On Wednesday at the market opening, Intel shares were $59.51, up from $53.24 at the Tuesday close.

"While Swan accomplished a lot, it wasn't enough," said Patrick Moorhead, analyst at Moor Insights & Strategy.  "Swan was dealt a difficult hand and 10nm was already off the rails when he was appointed CEO. Chip problems take years to address."

Swan's departure came down to investor pressure and impatience, Moorhead added.  

He said Intel won't see major strategic changes under Gelsinger. "I do expect him to focus on the company's engineering culture and get it back to an execution culture."

Dan Hutcheson, an analyst at VSLI Research, said he couldn't think of "anyone more qualified to be CEO of Intel as it faces the current storms."

He noted that Gelsinger was the architect of the original 80486 processor and led 14 different multi-processor unit programs. He also played key roles in Intel Core and Xeon family development. His track record at VMWare shows a "deep understanding of how data center architectures have evolved over the last two decades," Hutcheson said.

Jack Gold, an analyst at J. Gold Associates, said Gelsinger left Intel in 2009 after not being promoted to CEO, a position he wanted. "Now we're coming full cirucle with Pat coming back to lead Intel," Gold said. "While Bob Swan did a good job, Pat brings a technology expertise to the job that Bob Swan didn't have. I think it's the right move for the times, given the many challenges Intel has now."

Gold added, "At the crossroads that Intel is in right now, with so many diverse technologies to manage and a real need to revamp its manufacturing to become more competitive, Pat is probably a good choice to lead. He understands the marketplace, the technology and is a 'take no prisoners' type of leader.  It will take him a year or so to get things back on track, but I have no doubt he can do it if anyone can."

 

 

RELATED: Intel investors flee as CEO Bob Swan sings the XPU song