Analysis: Why Intel CEO Pat Gelsinger was forced out
SAN FRANCISCO – Intel CEO Pat Gelsinger announced his retirement early this week. However, new reports indicate that the decision behind the CEO’s departure was more complicated than what was initially shared by the company.
In a meeting last week, the Board of Directors had reportedly expressed doubts about Gelsinger’s turnaround strategy for the embattled chipmaker, with one source telling Reuters that change was happening too slowly. The Board allegedly gave Gelsinger the option of resigning or risk being ousted. The CEO chose to step down.
A ‘bittersweet’ departure
Gelsinger called his departure “bittersweet” as it marked the end of a four-decade career where a majority was spent at Intel.
“It has been a challenging year for all of us as we have made tough but necessary decisions to position Intel for the current market dynamics,” Gelsinger said. “I am forever grateful for the many colleagues around the world who I have worked with as part of the Intel family.”
In less than four years at the helm of Intel, Gelsinger had developed a turnaround plan that would have seen the company regaining its market share in the chipmaking business. Intel has been struggling to keep up with TSMC, which collaborates with Nvidia, now one of the world’s most valuable companies.
Intel was also recently booted out of the Dow Jones Industrial Average, with Nvidia taking its slot.
Also Read: Nvidia's blueprint for bold leadership
Intel on the hunt for a new CEO
With Gelsinger out, Intel has named CFO David Zinsner and Michelle Johnston Holthaus as interim co-CEOs as the company searches for a permanent CEO. Holthaus is also CEO of the newly created Intel Products business.
Meanwhile, longtime board member Frank Yeary will step up as interim executive chair and lead the hunt for a new CEO.
Yeary was said to be instrumental in the ouster of Gelsinger, according to a report by CNBC, which cited an anonymous source familiar with the matter.
“On behalf of the board, I want to thank Pat for his many years of service and dedication to Intel across a long career in technology leadership. Pat spent his formative years at Intel, then returned at a critical time for the company in 2021,” Yeary said.
Eclipsed by Nvidia
When Gelsinger returned to serve as CEO in 2021, he was called in to “stabilise” Intel. However, certain decisions led by Gelsinger reportedly hurt the company’s cash flow and blew up its debt even before the turnaround plan could produce the desired results.
Since Gelsinger’s ascent, Intel’s market capitalisation has halved. Meanwhile, its stock price has plummeted 52% year to date.
However, Intel’s biggest setback has been its failure to capitalise on the AI frenzy. The company was said to have made several strategic missteps and market shifts.
Key factors included Intel’s supposed slow adaptation to computing platforms and graphics processing units crucial for AI workloads. Nvidia, meanwhile, capitalised on this trend early.
Intel also purportedly faced delays in adopting advanced manufacturing technologies, such as 7nm and 10nm processes, which allowed competitors like TSMC to gain an edge. As a result, Nvidia’s market cap surged, while Intel struggled with declining revenues and market share.
The case of Intel: Lessons for business leaders
Industry observers offer a few leadership and innovation lessons from the rise and fall of Intel in the age of AI:
1. Adaptability to market changes
Intel’s failure to embrace the mobile revolution and AI trends illustrates the need for companies to remain agile and responsive to technological shifts.
2. Long-term vision over short-term gains
Prioritising immediate financial performance over innovative engineering led to missed opportunities, such as the chance to acquire Nvidia.
3. Investment in emerging technologies
Intel's neglect of GPUs and AI-specific chips showcases the importance of investing in future technologies rather than solely focusing on core products.
4. Unified strategy
A lack of cohesive product strategy in AI hindered Intel’s ability to compete effectively, emphasising the need for a clear, unified vision in innovation efforts.
5. Embracing risk
Intel’s hesitance to pursue bold acquisitions or pivot into new markets reflects a broader reluctance that can stifle growth and innovation.