Pat Gelsinger has a massive task ahead of him when he takes over as Intel CEO next month.
The semiconductor company, whose products have served as the brains of countless computers and other important technologies, has in recent years lost its position as the industry’s undisputed leader. Among the biggest challenges Intel faces: unprecedented competition from former steadfast partners, major delays in its next-generation chips, the departure of top talent and an activist shareholder banging at the door.
Experts say Intel (INTC) urgently needs an infusion of fresh leadership and a bold, new strategy.
“I’ve always sort of wanted my career to be where the center of action is at — where is the disruption and maximum innovation going on?” Gelsinger told Samsung President and Chief Strategy Officer Young Sohn in an October interview, prior to the Intel announcement.
Investors are counting on Gelsinger — Intel’s former chief technology officer and current CEO of software giant VMWare (VMW) — to bring that kind of vision back to Intel. The company’s stock jumped 11% after Intel announced his hiring last week.
But lately, Intel’s competitors have bested it on Wall Street — over the past two years, Intel’s shares have grown nearly 26%, versus the almost 169% growth in the PHLX semiconductor index (SOX). In that time, AMD (AMD) and Nvidia (NVDA) shares are up around 398% and 300%, respectively.
“These are structural issues that will take many many years to fix,” said Hans Mosesmann, managing director at Rosenblatt Securities. “He has a monumental challenge.”
The share price, among other concerns, sparked activist investor Dan Loeb of Third Point to press for change at the company earlier this month.
Outgoing CEO Bob Swan is handing over a company still in relatively good financial shape. When Intel reports earnings Thursday, Wall Street analysts expect it will post $75.4 billion in annual revenue for 2020, up almost 5% from the prior year.
But analysts say that may not last as Intel works to engineer a turnaround.
Investors and customers expect Gelsinger to articulate a plan to address Intel’s manufacturing issues. He’ll also have to chart a path for new areas of growth, as analysts say it’s unlikely Intel will ever regain the market dominance it once enjoyed in its core PC business. That kind of pivot may not be easy for a 52-year-old, $72 billion company in the semiconductor industry, where developing a robust tech roadmap can take years.
“I think if they cannot get back on track, the competition now is much stronger than it ever has been, ever,” said Alan Priestley, vice president analyst at Gartner. “So the competition will continue to gain share at Intel’s expense.”
Manufacturing challenges
Intel is known for manufacturing its own chips — a distinction that was seen as a competitiv