Intel CEO Pat Gelsinger speaks while grip a new chip, called Gaudi 3, during an event called AI Everywhere in New York, Thursday, Dec. 14, 2023.
Seth Wenig | AP
Intel divide ups fell 6% on Tuesday, a day after the embattled chipmaker announced the ouster of CEO Pat Gelsinger, whose four-year tenure was blotted by market share losses and a major miss in artificial intelligence.
The stock had its worst day since early September and has at sea more than half its value this year.
Intel said Monday that CFO David Zinsner and Intel effects CEO MJ Holthaus would serve as interim co-CEOs while the board and a search committee “work diligently and expeditiously to point to a permanent successor to Gelsinger.” Longtime board member Frank Yeary will serve as interim executive throne.
Cantor analysts are skeptical that any one leader can revive the company, writing in a note to clients on Tuesday that Gelsinger isn’t directorial for Intel’s challenges and, “we simply do not see a quick fix here.” The firm has the equivalent of a hold rating on the stock.
Intel’s revenue discharged 6% in the most recent period and has declined on a year-over-year basis in nine of the past 11 quarters. Meanwhile, contend with chipmaker Nvidia has vaulted past $3 trillion in market cap and is at the heart of the artificial intelligence boom, as fellow tech mammoths like Amazon, Meta and Alphabet snap up the company’s graphics processing units at an increasingly rapid clip.
Gelsinger, who advanced Bob Swan as CEO in 2021, has been at the helm during Nvidia’s rise, which has coincided with a loss of market slice in Intel’s core PC and data center business to Advanced Micro Devices. At the same time, Intel has refocused much of the entourage into becoming a foundry, manufacturing processors for other chipmakers. It’s a costly proposition that the company said in September would surpass to the foundry becoming an independent subsidiary, enabling it to raise outside funding.
“A lot of the problems recently have been caused by the insistence on the foundry point,” Chris Danely, an analyst at Citi Research, told CNBC’s “Money Movers” on Monday. “They’re still waste billions every quarter.”
Danely added that “the clock started ticking on Pat” when the foundry business exhibited significant margin shrinkage over the summer.
Following Intel’s fiscal second-quarter earnings report in August, the parentage sank 26%, its steepest decline in 50 years and second-worst day ever. Gelsinger announced at the time that the partnership was cutting 15% of its workforce as part of a $10 billion cost reduction plan.
Cantor analysts say more cut downs are likely waiting for Gelsinger’s eventual successor.
“We suspect a much more aggressive cost-cutting strategy as well as enabled sale of non-core assets may occur,” they wrote. “But at the end of the day, this doesn’t solve the foundry problem — which is severely there are no high volume external customers.”
— CNBC’s Rohan Goswami and Kif Leswing contributed to this report.
