Intel CEO Bob Swan. Picture: REUTERS/STEVE MARCUS
Intel CEO Bob Swan. Picture: REUTERS/STEVE MARCUS

Intel CEO Bob Swan will be replaced by the head of VMware, Pat Gelsinger, who’s returning to the company he left a more than a decade ago to try to lead it out of a crisis threatening its leadership of the chip industry.

Swan was named CEO in January 2019 after serving as interim CEO for about six months, reluctantly taking the job after the firing of his predecessor, Brian Krzanich. Gelsinger will rejoin Intel where he started his career as an engineer at age 18 and spent more than 30 years, working his way up the ranks before leaving in 2009 for EMC. He was appointed CEO of software maker VMware in 2012.

“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 period of transformation at Intel,” chair Omar Ishrak said in a statement.

Intel shares jumped as much as 13% in New York after the announcement. CNBC earlier reported the move.

The world’s largest chipmaker has been beset by manufacturing delays that have left it facing rivals who claim their products are better. Prominent customers such as Apple have deserted Intel and begun designing their own chips, and other big buyers of silicon such as Amazon.com and Alphabet have increasingly turned to supplying themselves.

Intel has begun talking with Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics about the Asian companies making some of its best chips.

That has led to pressure from activist investor Dan Loeb, who in December urged the board to explore strategic alternatives for the company, including a possible breakup and sale of assets.

Santa Clara, California-based Intel is scheduled to hold a board meeting later on Wednesday. A person familiar with the discussion said the decision to replace Swan was made by the board and not formally proposed by Loeb’s Third Point. The board decided it wanted a person with more of a technology background rather than finance.

Intel said the move was unrelated to the company’s financial performance. The company expects its fourth-quarter revenue and earnings per share to exceed its previous guidance, it said. Intel has also made further progress on its 7nm chip and will update investors on its scheduled earnings call on January 21.

Sanford C Bernstein analyst Stacy Rasgon said Gelsinger was likely the preferred external candidate in the previous CEO shuffle.

“He will be seen as a potential shot in the arm to attempt fixing both the company’s technical, as well as cultural, issues,” Rasgon said. He cautioned that the “next several years are likely set in stone” and any changes being made will not produce results for about three years.

Gelsinger’s appointment marks a return to technical, home-grown leadership of Intel. Swan was the first person to lead the chipmaker who had not spent most of his career at the company. Gelsinger also marks a return to a line of leadership that was groomed under Intel co-founder Andy Grove, who molded an organisation that dominated the $400bn industry for decades.

Gelsinger previously served as chief technical officer of Intel after getting a start as one of the designers of the first of the company’s X86 series processors that are still the most widely used in computing today.

“My experience at Intel has shaped my entire career, and I am forever grateful to this company,” he said in a note to employees posted on the company’s website. “To come back ‘home’ to Intel in the role of CEO during what is such a critical time for innovation, as we see the digitisation of everything accelerating, will be the greatest honor of my career.”

The first order of business for Intel’s new CEO will be to try to fix the company’s manufacturing stumbles. Advancing production techniques is one of the most important factors in improving the performance of semiconductors.

Intel promised a step called 10nm would appear in 2017. That’s only just reaching mainstream in important products now. Its successor, 7nm, is also a year late. Those delays have allowed TSMC, which provides outsourcing production for most of Intel’s rivals and many of its customers, to take the lead.

Bloomberg

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