The torment of Pat Gelsinger in Intel could be a boomerang warning for CEOs: Even when the company wins you back and appoints you CEO, the honeymoon can end in a flash.
Intel’s board of directors announced Gelsinger’s retirement as CEO, effective yesterday, today. Company he did not name a successor and instead named the two executives as interim co-CEOs in place of Gelsinger, a former Intel lifer who had been CEO for only three years. Intel also said Gelsinger was leaving the board. In other words, the company left little room for interpretation that Gelsinger had been fired.
“Today is, of course, bittersweet because this company has been my life for most of my working career,” Gelsinger said in a statement.
In response, Intel stock prices rose 5% in premarket trading before falling again. But that jump may have been the board’s goal, says Jo-Ellen Pozner, professor of organizational theory and management at the Haas School of Business, University of California, Berkeley. Companies often decide to make big announcements like this because they know Wall Street will respond positively, she says Wealth. It’s a signal that the company is serious about a strategic change of direction, especially when the CEO loses a seat on the board.
“When a CEO is replaced, if there hasn’t been a significant scandal or whiff of wrongdoing, they’ll keep their seat on the board, even if it’s kind of a ceremonial position,” says Pozner. “It is an acknowledgment that they have contributed, that they are an important part of the team, but that a change is needed.”
Removing Gelsinger from the board, she added, “seems like adding insult to injury.”
A reversal attempt
Gelsinger’s sudden departure was unexpected given his history with the company. He began his career at Intel in the 1980s and spent decades there before leaving to head software company VMWare in 2009.
From the start of his tenure as CEO at Intel, Gelsinger was supposed to be the man to turn things around. Once a leader in the category, Intel has fallen behind its competitors in terms of high-end chips. Earlier it was too late to answer the rise of smartphones and missed the surge in demand for mobile chips. More recently, he failed to predict the boom in artificial intelligence and watched a competitor Nvidia seize the opportunity and then raise the market capitalization from over 3 trillion dollars.
When Gelsinger took over as CEO, he presented an ambitious plan the execution of which would require several years. Under his leadership, Intel would begin manufacturing chips and selling them to other companies. The plan called for billions, including about $20 billion in subsidies from CHIPS and the Biden administration’s Science Act. But like Wealth reportedIntel had little to show for that level of spending this year. Instead, the share price fell. In August, the company announced would fire 15% of its staff and seek $10 billion in spending cuts. The fall was so heavy that Qualcomm reportedly saw Intel as a potential takeover target.
In this context, Gelsinger lost the confidence of the board. Citing sources close to the situation, Bloomberg reported that executives were frustrated by Gelsinger’s slow progress in chasing Nvidia’s leadership. Frank Yeary, Intel’s independent chairman, will now serve as interim executive chairman.
Year of Expulsion
That might be cold comfort to Gelsinger, but he joins a long list of CEOs who have abruptly left their roles this year, including Karen Lynch at CVS, Bob Bakish at Paramount Globaland Laxman Narasimhan on Starbucks.
“2024 seems to be the year many boards lose patience with CEOs,” executive consulting firm Ferry Korn recorded this fallpointing to a record increase in CEO dismissals in the first half of the year. Gelsinger is also not the only leader to be shown the door with no successors named. It was the same with The peloton, Lattice semiconductor and PriceSmart.
Across corporate America, boards may be rushing in response to deep concerns about markets, Pozner suggests, especially after the presidential election and Trump’s plans to shake up trade policy. “There’s just a lot of uncertainty about what will make people happy and what people are actually looking for in all areas of life.”
“Companies may be making big moves because they’re worried about being left behind,” she adds. Boards seem to be thinking, “We’ll try something. We’d rather come down swinging than wait to be caught off guard.”
