Intel Considers Outsiders for CEO, Including Marvell’s Head

By Investor Empires On Dec 3, 2024

(Bloomberg) — Intel Corp.’s research will focus… About a new CEO is largely on the outside, as the chipmaker considers candidates such as the head of Marvell Technology Inc. Matt Murphy and former CEO of Cadence Design Systems Inc. Lip-Bu Tan, according to people familiar with the situation.

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The company has hired executive search firm Spencer Stewart to help find a new president and is evaluating candidates, said the people, who asked to remain anonymous because the deliberations are private. This includes looking beyond Intel’s walls for talent, which represents a break from tradition.

The surprise ousting of CEO Pat Gelsinger this week has launched an urgent search for new leadership at a time when the chipmaker’s fortunes are shaky and its bench has been depleted by years of management turnover. Gelsinger took the reins just three years ago, and since then has focused on a complex and expensive effort to turn around the struggling company.

But that didn’t give him enough time to revive another Intel legacy, the executive training program that once provided leaders for the rest of the industry. Currently, CFO David Zinsner and Executive Vice President Michelle Johnston-Holthaus serve as interim co-CEOs.

Marvell shares fell as much as 2.3% on Tuesday after Bloomberg News reported that Murphy was under consideration. Intel stock fell more than 5% as of 1:09 pm in New York, continuing the decline that began Monday.

All but one of the company’s leaders since its founding in 1968 have been locals, and the exception, Bob Swan, was given the job as an interim measure when the board had to remove Brian Krzanich. The drama broke a series of carefully crafted feuds that had stabilized the company for five decades. Krzanich’s tenure also saw the departure of a number of longtime Intel employees.

As the board searches for a permanent replacement for Gelsinger, analysts say, it may be difficult to choose from within, in part because the early exodus means there are fewer strong internal candidates. On the other hand, there is little optimism that the company will be able to bring in an outside savior who can turn things around right away.

“It may be difficult to find a replacement with the right experience and background, with the ability to manage an organization as complex as Intel and able to effectively handle multiple headwinds,” KeyBanc Capital Markets analyst John Vinh wrote in a note on Monday. .

Intel declined to comment on potential CEO candidates. Marvel, Murphy and Tan did not immediately respond to requests for comment. Reuters previously reported that the 65-year-old Tan, who served on Intel’s board of directors until earlier this year, was vying for the position.

One way to balance the inside-outsider equation is to bring in a longtime Intel executive who, like Gelsinger, left during the management turmoil of recent years.

Among those candidates is Stacey Smith, a former Intel executive who joined the company’s board this year. Intel’s former CFO, who also spent time in the company’s sales organization, exited during Krzanich’s tenure in 2018 and was a previous applicant for the top job. Among the most recent departures is Gregory Bryant, who ran Intel’s personal computer unit. Join Analog Devices Inc. In 2022.

Also among this group is Ampere Computing LLC CEO Renee James, who has created a startup that is trying to compete with Intel in server chips. She served as president of Intel until she was sidelined by Krzanich. Kirk Scoggin, a former Lenovo Group Ltd. executive who left Intel in 2016, was in charge of Intel’s server chipset unit when it dominated the industry.

Another potential hiring pool: Intel’s largest customers, many of whom have embarked on their own chip programs with varying levels of success. Johnny Srouji is senior vice president of Apple Inc’s successful in-house chip unit. The iPhone maker’s in-house software started a trend that’s been replicated elsewhere, most notably by Amazon.com Inc.’s AWS unit. Microsoft, Alphabet Inc’s Google, and MetaPlatforms Inc have also built large chip teams.

When Intel was trying to bring Gelsinger back to the company about four years ago, it was reported that some other chip company leaders, including Marvell Murphy, were under consideration. Intel has now contacted him to conduct the latest research, the people said.

Despite the sharp decline in its fortunes, Intel remains one of the most important companies in the technology industry. It still ranks among the largest chipmakers by revenue, and more than 70% of the world’s PCs and servers run on its processors. Its plan to build additional factories in the United States is the cornerstone of the federal government’s efforts to produce more chips on American soil.

Whoever Intel chooses, the new CEO will need time to make up for more than $20 billion in revenue lost to competitors over the past two years.

“In addition to not having a seat, having a new outside CEO coming to Intel is a multi-year job, which is difficult in an ever more intense cycle of innovation,” said Hans Mosesmann, an analyst at Rosenblatt Securities.

Given the technical nature of the industry — designing and manufacturing chips requires a mix of electronic engineering, chemistry and physics typically led by teams of Ph.D.s — Intel may be reluctant to promote CFO Zinsner on a permanent basis. When CFO Swan was the company’s interim leader, analysts wondered whether he understood the technical side of the business well enough to make strategic decisions.

Gelsinger, who was brought back to Intel after a decade, spoke about his ties to the company’s past and his plan to restore its strengths. Now, that’s probably no longer a selling point. The immediate need to win over Intel’s competitors and turn them into customers for its outsourced manufacturing business may involve alienating Intel’s long-term lieutenants.

If a board is looking for the most immediately transferable skills, Taiwan Semiconductor Manufacturing Company and Advanced Micro Devices Inc. And Nvidia Corp would be the most obvious talent. During the recent search for a CEO for the company, AMD’s Lisa Su was mentioned as a preferred choice by several analysts. But since then, the company she runs has risen to even greater levels of success, taking market share from Intel and emerging as a top contender to catch up with Nvidia in AI chips. AMD is currently worth more than twice what Intel is worth in terms of market cap.

Hiring from Nvidia can also be difficult. Co-founder and CEO Jensen Huang has created a unique management structure that eschews traditional hierarchies. Hwang has dozens of direct reports in a horizontal structure, making it nearly impossible to determine which of them might be better positioned to make a move higher — at Nvidia or at another company like Intel.

Meanwhile, Taiwan’s TSMC has overtaken Intel in manufacturing capabilities and made itself the leading producer of chips for other companies. It manufactures the world’s most advanced chips, working for Apple, AMD, Nvidia and a host of other companies. At the head office in Hsinchu, among the executives considered instrumental in guiding TSMC’s meteoric rise were Intel veteran Kevin Chang and his deputy, associate executive vice president of operations Cliff Ho. In the US, YL Wang, CEO of TSMC Arizona, recently scored a notable victory, helping that plant achieve better returns than his similar facility at home.

However, it is uncertain whether TSMC’s top leaders would consider abandoning the world’s top chipmaker to save a less stable company. But former TSMC Chairman Mark Liu, who spent some of the early years of his career at Intel and retired from the Taiwanese chipmaker earlier in 2024, may be someone Intel could attract — even though he is older than the average American CEO. . Leo turns 70 this year.

“We do not expect it will be easy for Intel to find a new leader with the qualifications needed to lead Intel out of this challenge,” Chris Caso, a Wolf Research analyst, wrote in a report. “Gelsinger came in with a lot of experience at Intel, and there weren’t many suitable candidates.”

–With assistance from Debbie Wu.

(Updates with Marvell shares in fifth paragraph.)