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Swan off

13 January 2021 By Richard Beales

It must be tough for a chief executive when news of his exit adds $25 billion to his company’s market value. That’s what happened on Wednesday morning for Intel’s Bob Swan. News that VMware boss Pat Gelsinger will replace him next month initially added 12% to the chipmaker’s stock price. It’s a reflection of investors’ hope that the company could regain its lost edge.

Intel’s stock has underperformed its global sector since Swan took over, initially as interim CEO, in mid-2018. Big new chip programs have suffered delays, and the switch by Apple, for example, to more powerful processors of its own design speaks to Intel’s failure to hold its former position in the vanguard of the industry.

Gelsinger is a good choice to tackle that issue, having been Intel’s first chief technology officer in a 30-year career at the company before moving to data storage specialist EMC and then cloud-computing software maker VMware. Regaining a lost advantage is easier said than done, but support at the top of the company from someone who spent decades building the business should help.

Meanwhile, activist investor Dan Loeb’s Third Point owns a stake in the company and in December called for Intel to reevaluate its strategy, raising the possibility of separating its manufacturing and design operations – a split which might help each focus better.

A new CEO doesn’t mean Loeb’s suggestions will come to pass. But it does mean there’s an opportunity for fresh thinking, so it potentially clears the path should radical surgery on the company make sense to the new boss and the board.

That’s the mix of hopes wrapped up in the market reaction. Gelsinger’s departure from VMware cost the company’s shares some 5% of their value at Wednesday’s open, or about $3 billion. The dollar numbers suggest he could be worth a lot more to Intel – or perhaps that Swan’s leadership had become a bug rather than a feature. Either way, expectations for a reinvigorated Intel now rest squarely on the new CEO’s shoulders.


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