Intel CEO Pat Gelsinger is out, stock up 5%

Intel announced Monday that CEO Pat Gelsinger retired from the company effective Dec. 1, capping a tumultuous nearly four-year tenure at what was once America’s leading semiconductor company but which saw its stock price and market share collapse under his tenure.

Intel CFO David Zinsner and Intel products CEO MJ Holthaus were named interim co-CEOs. Longtime board member Frank Yeary will serve as Intel’s interim executive chair. Shares of Intel were up 5% Monday in pre-market trading.

Yeary, Intel’s longest-serving board member, will now have to preside over yet another CEO search process. Gelsinger, 63, had an illustrious career at Intel, rising to become the company’s first chief technical officer at the turn of the century, before he took a senior role at EMC. Gelsinger returned to the company from VMware, where he was CEO, to stabilize Intel in 2021, replacing then-CEO Bob Swan.

“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 in a press release.

Gelsinger set out an audacious plan when he arrived in 2021 to transform the languishing company into a chipmaking juggernaut. He sought to achieve parity with the two leading chipmakers, Samsung and Taiwan Semiconductor Manufacturing Company. He pursued big buildouts in the U.S. and around the world, a costly endeavor that weighed heavily on Intel’s free cash flow and increased the company’s debt load.

He also wooed government investment, positioning Intel as the single largest beneficiary of the U.S. Chips and Science Act. Government money has begun to flow to Intel in recent weeks and will aid the company’s chip fabs in Arizona and Ohio. Gelsinger’s retirement comes a week after Intel and the CHIPS and Science Act office finalized a $7.86 billion grant.

Gelsinger also moved to position the company as vital to U.S. national security. He won a multi-billion dollar contract with the Department of Defense to build secure chips, and in meetings with analysts and prospective customers stressed that Intel was a trusted partner to the U.S. government.

But all that was not enough to assuage investors, who increasingly began to see Intel’s aggressive spending as a folly.

Investors became increasingly leery of Intel’s prospects, especially as the AI wave buoyed rival Nvidia and left Intel in the dust. The company’s market cap is less than half of what it was in 2021, and briefly crossed beneath $100 billion earlier this year. The company’s stock has fallen 52% year-to-date.

In August, Intel reported disappointing quarterly results, sparking the sharpest sell-off in 50 years, and said it would lay off more than 15% of its workforce as part of a $10 billion cost-reduction plan. CNBC reported that Intel had engaged advisors to defend itself against activist investors.

There is no indication yet that an activist has taken a sizable position in the company’s stock, nor any sign that overtures have been made to Intel’s board. It isn’t clear what agenda an activist would pursue at the company.

Intel revealed plans in September to turn the company’s foundry business into an independent subsidiary, a move that would enable outside funding options. That same month, Qualcomm made overtures about a possible takeover.

Gelsinger’s replacement, whenever found, will assume command of a company that is smaller and more challenged than ever before. Many of the problems Gelsinger faced were inherited: to not pursue a chipmaking mandate for Apple’s mobile devices and passing on the acquisition of Nvidia were just two of the reportedly conscious decisions that Intel’s prior leadership made that left the company at a competitive disadvantage.

Those decisions were made by Intel’s board and past CEOs. But Gelsinger’s weekend ouster raises fresh questions about the company’s governance. Lip-Bu Tan stepped off Intel’s board earlier this year, leaving the company without any directors who had semiconductor expertise. Numerous reports have emerged in the weeks since detailing a dysfunctional corporate acquisition strategy and boardroom rancor.

— CNBC’s Jordan Novet contributed reporting.

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