Just twenty years ago, Pat Gelsinger became
First-Chief Technology Officer. The engineer earned this distinction after spearheading the design of the groundbreaking 486 computer processor and winning the honor of Chief Executive Officer Andy Grove, who mentored him for years.
Gelsinger did not get Grove’s top job, though. He left in 2009, after 30 years at Intel (ticker: INTC). Now Jelsinger is back, with the CEO job he probably wanted all along. He took over for Bob Swan on 15 February.
Gelsinger cut his work for him. When Intel reports fourth-quarter earnings on Thursday, the chip giant is projected to generate a huge annual profit of nearly $ 21 billion on sales of $ 75 billion. Analysts predict a fall in 2021. A series of manufacturing problems at Intel has allowed rivals
Advanced Micro Devices
(NVDA) to take a share in major chip markets.
Intel stock fell 17% in 2020, even as the benchmark PHLX Semiconductor Index rose 51%.
In November, stocks low near 2020, Baron’s It was argued that Intel still had a lot of value and could regain its mojo with new ideas and bold new management. Since our article, the stock is up nearly 30%, a 5% gain for the S&P 500 index. Intel shares have been boosted by pressure campaign by activist investor Daniel Loeb, who demanded a significant change from Intel’s board in late December.
Gelsinger’s appointment is a step in the right direction. His technical expertise is a clear contrast to the financial background that Swan brought to the job.
Dan Niles, a longtime chip investor and portfolio manager of Satori Fund, says Gelsinger’s appointment reminded him of the promotion of Satya Nadella’s CEO
(MSFT). “My belief for tech companies – for any company – is that having someone from the company’s DNA is important,” Niels says. After becoming CEO of Nadella in 2014, Microsoft stock has returned 576%, with the S&P 500 returning 149%.
At the same time, Gelsinger brings the benefits of an outsider. He spent three years as Chief Operating Officer at EMC before becoming CEO of software pioneer
(VMW) in 2012. Understanding both software and hardware engineering has become critical to success in the chip industry.
Moor Insights & Strategy analyst Patrick Moorehead, who worked at AMD during Gelsinger’s Intel tenure, describes him as a tough competitor, a good executioner and a man capable of motivating people. “That’s what Intel needs,” he says.
Gelsinger’s most pressing case would be to deal with Intel’s manufacturing issues. For a company that has long insisted on doing things at home, there is no easy fix. Atomic level precision, large capital costs and competition for top talent make it a long process.
When it comes to the most advanced chips, Intel is already far behind in building the powerhouse
Taiwan Semiconductor Manufacturing
(TSM), which makes chips for AMD and Nvidia, as well
(AAPL). Gelsinger must decide whether to reduce all of Intel’s broader approach to chips and outsource more work to a manufacturer like Taiwan Semi. It has become Wall Street’s priority in recent months.
One of Swann’s critical final acts at Intel will be a manufacturing update on Thursday during the company’s earnings call. After that, Intel’s future lies in Jelsinger’s hands. The good news for Intel investors is that he is likely to be the best person for the job.
Write Max A. Cherney at [email protected]