Pat Gelsinger is stepping down as CEO of microchip giant Intel, which employs nearly 10,000 people in Israel, after four years in the post. Gelsinger will be replaced by two VPs who will run the company jointly as interim CEOs until a permanent replacement is found: CFO David Zinsner and Michelle Johnston Holthaus, general manager of the Client Computing Group, who will also be appointed to the new position of CEO of Intel Products, probably as a part of a possible spin-off.
Intel’s share price is up by more than 4% following the announcement of Gelsinger’s departure.
During Gelsinger’s tenure as CEO, Intel’s share price fell by 60%. It has fallen by nearly 50% this year. Gelsinger was appointed in early 2021 to rehabilitate the company, which was suffering from a management and technological crisis, with a high turnover of senior managers. His appointment was seen as promising because of his intimate knowledge of the company, where he had previously served as CTO. He presented a vision of upgrading Intel’s technology, strengthening its production arm, and cutting the workforce.
Gelsinger did not succeed in restoring investor confidence in Intel, which currently has a market cap of $103 billion. The independent production arm did not take off, customers were reluctant to come, and production problems still bedeviled its factories. Intel got into cash flow difficulties, and had to raise external finance and to halt construction of several new factories, in Germany, Poland, Israel, and Malaysia.
15,000 laid off
Although the critical decision about artificial intelligence (AI) were made before Gelsinger’s time as CEO – such as the acquisition of Israeli company Habana Labs for $2 billion in 2019 – during his tenure Intel did not manage to break the stable monopoly of Nvidia in AI processors. Moreover, the server processors business declined over several quarters and its market share did not stabilize, even in relation to its smaller competitor AMD. Intel’s AI processor sales will total just $500 million this year, while Nvidia’s will total some $60 billion.
Gelsinger presided over a prolonged downsizing program in which some 15,000 people are estimated to have accepted voluntary retirement or to have been laid off, more than 1,000 of them in Israel. Now the CEO himself is on his way, having ended his tenure yesterday, according to the company’s announcement.
Gelsinger’s critics within Intel and outside it argued that he ran the company conservatively. For example, while investors pressed for a full split between the development and the production sides of the business, Gelsinger opted for a partial split, with the management of the production division reporting to him.
Investors say that key customers like Nvidia and AMD will be prepared to produce at Intel’s factories when they are certain that they are not dealing with a company that ultimately seeks to compete with them. “On the whole, Gelsinger was an excellent CEO, but bringing about a change of direction in a production company with heavy equipment inventory and expenditure was apparently too much for him,” ANEK Capital co-founder and investment manager Orel Levy told “Globes”. “He tried to hold the stick at both ends: to talk about a split, but not to carry it out to the end. The customers did not come along, and the market did not see the move taking shape, and that was a pity, because only a split could have released value in all departments of the company, from chips to PCs to graphics processors.
“In the new situation in which Intel is looking for a new CEO, everything has been reopened, and new possibilities present themselves. We may see companies competing to buy parts of the company, and we may see new spin-offs, perhaps even of Mobileye. The new CEO may come with a preconceived agenda supporting a complete split between the various units, in a model similar to that of AMD, which gave birth to Global Foundries.”
Gelsinger’s departure does not look like good news for Intel Israel. As someone who worked at the company for 30 years in all, Gelsinger had a positive views of Intel’s operation in Israel, which, when he was a young engineer, had a great deal of influence on the global company. Gelsinger is also a devout Christian, and as such has a pro-Israel stance.
He aroused controversy when just two days before the US presidential election he revealed that Joe Biden’s administration had not transferred a promised grant of $8.5 billion to the company. Biden lost the election, and Intel received the grant last week, but in the smaller amount of $7.86 billion.
Published by Globes, Israel business news – en.globes.co.il – on December 2, 2024.
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