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Intel's New CEO Gives its Turnaround a Fighting Chance

Intel's New CEO Gives its Turnaround a Fighting Chance

Friday, 15 January, 2021 - 05:30

Intel Corp. now has a fighting chance. After a series of stumbles in recent years, the storied chip giant has found a new leader with the expertise it needs to spark a turnaround. Early Wednesday, the company said its board had appointed Pat Gelsinger, the current head of VMware Inc., as its next chief executive officer, effective Feb. 15.


The leadership change comes at a critical time. Intel has lagged behind its chief rivals on the back of repeated delays in moving to newer semiconductor production techniques, allowing Asian manufacturers such as Taiwan Semiconductor Manufacturing Co. to surpass it in its ability to make higher-performing chips. Intel’s troubles have spurred activist investor Third Point LLC’s Dan Loeb to get involved. Last month, in a letter to Intel Chairman Omar Ishrak, Loeb criticized the performance of the company’s management team and said attracting new leaders with engineering talent was its “most urgent task.”


It looks as if Intel has listened. Gelsinger may have the perfect background to figure out what Intel needs to do next. Prior to VMware, he spent 30 years at Intel, including serving as the chipmaker’s first chief technology officer. He also was the chip architect of one of Intel’s seminal processors — the 80486. If there is anyone who has intimate knowledge of the company, its technology and capabilities, it’s Gelsinger.


The management change should make a big difference. Bob Swan, who’s been CEO since January 2019, was never the right fit. His prior background was primarily as a financial business executive with various chief financial officer roles at companies including eBay Inc. and Electronic Data Systems Corp. In contrast, Intel’s leading competitors Nvidia Corp. and Advanced Micro Devices Inc. are led by leaders with strong engineering backgrounds.


For technology firms, technical expertise is perhaps the most important attribute for success. Shopify Inc. CEO Tobi Lutke once noted that the only reason he’s able to know which initiatives to fund, how long projects will take and how much infrastructure can be reused is because of his training as an engineer. Swan didn’t have this ability. Gelsinger does.


Changing CEOs isn’t going to instantly change Intel’s fortunes. Any decisions Gelsinger makes this year will take years to play out. But the executive is a great choice and exactly what Intel needed.


Bloomberg


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