Trending Articles
Trending Topics
Trending
Pat Gelsinger has stepped down from Intel. Or retired. Or been pushed out by the board, however you wish to look at it (the latter seems the most likely). So why did this happen and what happens next for Intel?
First, let’s acknowledge that things haven’t been easy for Pat Gelsinger since he became CEO of Intel in 2021. Although we have seen triumphs such as the Intel Core Ultra 200V series for laptops, and a remarkable partnership with AMD to form the x86 Ecosystem Advisory Group, the odour of bad news has always lurked in the background.
Most recently, Intel’s launch of “Arrow Lake” CPUs – taking the Core Ultra series to desktop PCs – suffered from critical reviews due to its lesser performance in gaming benchmarks and accursed blue-screen error screens. This was an unwelcome echo of instability problems with Intel’s 13th and 14th generation Core desktop CPUs.
There are have been bigger issues too. Gelsinger bet big on Intel’s foundry business, accepting billions of US government money in incentives and opening up its foundries – where CPUs are made – to other manufacturers for the first time. But it has struggled to lure companies away from TSMC and Donald Trump is likely to kill the incentives.
But perhaps Intel’s biggest problem is that it has failed to have an impact – yet – on the AI market. In particular, the lucrative data centres where generative AI services such as Midjourney and Microsoft Copilot live. That’s in contrast to AMD, which has emerged as the biggest rival to the currently dominant Nvidia.
“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,” said interim Executive Chair Frank Geary in a statement announcing Gelsinger’s retirement.
“Pat spent his formative years at Intel, then returned at a critical time for the company in 2021. As a leader, Pat helped launch and revitalise process manufacturing by investing in state-of-the-art semiconductor manufacturing, while working tirelessly to drive innovation throughout the company.”
All of which is true. But the clue as to why Pat had to go is in Geary’s next statement.
“While we have made significant progress in regaining manufacturing competitiveness and building the capabilities to be a world-class foundry, we know that we have much more work to do at the company and are committed to restoring investor confidence,” he said.
Although the share price saw a minor bounce after news of Gelsinger’s appointment, it has since dropped back. And it looks like a long road back to the $50 share price we saw at the end of December.
Back to Geary’s statement: “As a board, we know first and foremost that we must put our product group at the centre of all we do. Our customers demand this from us, and we will deliver for them.”
And clearly the board felt that Pat Gelsinger was not the person to put the product group at the centre of the company’s plans, perhaps believing he was too wrapped up in his grand strategy that revolved around the foundries.
In the same statement, Gelsinger said this: “Today is, of course, bittersweet as this company has been my life for the bulk of my working career. I can look back with pride at all that we have accomplished together.
“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. I am forever grateful for the many colleagues around the world who I have worked with as part of the Intel family.”
We’d love to hear what Pat really has to say, but that may have to wait a while. All we’ll point out is that it’s incredibly unusual for someone to retire from a CEO position with immediate effect. In fact, he officially retired on 1 December, with Intel’s announcement coming the day after.
We can’t imagine those are optics that the Intel board wanted.
With immediate effect, the board is on the hunt for a new CEO. A hunt that could take months, by which time it may have sold off certain parts of the business. We cover this in greater detail below.
Whilst the search for a new CEO happens, Intel has appointed David Zinsner and Michelle Johnston Holthaus as interim Co-Chief Executive Officers. Zinsner only joined Intel from Micron in 2022, but he’s the money guy (Chief Financial Officer, more formally). MJ, as she’s known, is the CEO of Intel Products and an Intel stalwart having joined in 1996.
“With Dave and MJ’s leadership, we will continue to act with urgency on our priorities: simplifying and strengthening our product portfolio and advancing our manufacturing and foundry capabilities while optimising our operating expenses and capital,” said Geary. “We are working to create a leaner, simpler, more agile Intel.”
That last section is interesting. Leaner, simpler, agile. Three words that boil down to the same thing, you might argue, which is that Intel is looking to sell off parts of its non-core business that currently weigh it down.
So let’s quickly examine how Intel is structured and which groups are most profitable.
Intel has five major groups:
According to Intel’s annual report, this is how each group performed financially in 2023.
| 2023 revenue | 2023 profit* | Y-on-Y rev change | Y-on-Y profit* change | % of Intel’s revenue | % of Intel’s profit | |
| Client Computing | $29.3bn | $6.5bn | -8% | +19% | 55% | 114% |
| Data Center & AI | $15.5bn | -$500m | -20% | -180% | 29% | -9% |
| Network & Edge | $5.8bn | -$500m | -31% | -150% | 10% | -9% |
| Mobileye | $2.1bn | $700m | +11% | Level | 4% | 12% |
| Foundry Services | $1bn | -$500m | +100% | -40% | 2% | -9% |
* Profit here equates to operating income, but we’re simplifying things.
So the good news for Intel is that its biggest revenue driver, the Client Computing Group, is also its most profitable. The bad news that its revenue appears to be on a downward trend.
The terrible news that both its DCAI and NAE groups are struggling in the face of heavy competition. And that AI, which should be its most profitable area – just look at Nvidia – is part of a loss-making group.
Looked at in purely financial terms, you can see that Mobileye and Intel Foundry Services are minnows. There is potential for Intel’s foundries, but in light of Donald Trump’s views on the CHIPS Act – and Intel is the chief beneficiary of the Act through billions of dollars in incentives – the future looks uncertain.
Viewed through this lens, Pat Gelsinger’s chances of staying as CEO were effectively over once Donald Trump won the US election. The board felt it had to act, as Gelsinger had invested so much personal energy into the foundries strategy.
In the short term, Intel is on the hunt for a new CEO. A process that is likely to take months, and may yet be interrupted by the sale of elements of parts of the company. We believe that Qualcomm was interested, but that deal now looks on hold at the very best.
In the longer term, a stripped-down Intel that focuses on what it does best. And that thing is surely designing CPUs.
