Pat Gelsing’s Rapid Exit Is a Critical Look at a Silicon Valley Shakeup
The Intel Corporation abruptly removed Chief Executive Officer Pat Gelsinger on December 2nd, marking a dramatic end to a leadership tenure meant to reverse the company’s technological decline. The board’s decision leaves the semiconductor giant without a permanent successor and signals deepening frustration with the company’s strategic performance.
Gelsinger’s departure was unexpected, given his deep roots with the company. A long-time employee of Intel, Gelsinger began his career in the ’80s before spending some years at VMware and returning to the company in 2021. This history ended last week when the company’s board of directors announced his retirement and removed him from the board. Two executives were appointed as interim co-CEOs.
“Today is, of course, bittersweet,” said Gelsinger in a statement, “As this company has been my life for the bulk of my working career.”
Profound Challenges for a Silicon Valley Icon
Once a definite leader in semiconductor technology, Intel had fallen behind its competitors after missing critical market transitions. The company was late responding to the rise of smartphones and, more recently, failed to get ahead of the AI boom. Intel could only watch as competitor Nvidia ballooned to a market cap of over $3 trillion.
When Gelsinger took over, he laid out an ambitious plan to transform Intel’s manufacturing strategy. The plan required billions in investment and subsidies from the presidential CHIPS and Science Act.
However, looking back at the year’s outcomes, there was little benefit for such a level of spending. One of the significant outcomes was an August layoff announcement that cut 15% of the company’s staff to recoup billions through spending cuts.
The situation was so dire that Qualcomm reportedly considered Intel a potential takeover target.
Industry Anxiety Finds Its Focus on CEOs
In response to Gelsinger’s removal, Intel’s share prices shot up 5% in premarket trading. Jo-Ellen Pozner, an associate professor at Santa Clara University’s Leavey School of Business, has told the media that this is a typical reaction. “Companies might be taking big swings because they’re worried about getting left behind,” says Pozner. In an example of what boards might think, she proposes, “We’ll try something. We’d rather go down swinging than waiting to get caught off guard.”
Pozner credits the sudden nature of the departure to a general sense of anxiety that she says seems to prevail in the market. She says, “There’s just a lot of uncertainty about what is going to make people happy and what people are really looking for in all domains of life.”
There is a broader trend at work. 2024 has seen numerous high-profile CEO oysters, including CVS, Paramount Global, and Starbucks leadership changes. Executive consulting firm Korn Ferry has reported a record rise in CEO firings for 2024, saying in their release, “It appears that 2024 is a year in which many boards have lost patience with CEOs.”
The Gelsinger ouster has been particularly public and seems, to Pozner, to have come with added insult. “When a CEO is replaced,” says Pozenr, “When there hasn’t been a significant scandal or some whiff of wrongdoing, they’ll retain their seat on the board, even if it’s a kind of ceremonial position.”
The fact that Gelsinger also lost his board seat is a statement.
Intel has yet to name a permanent successor. This uncertainty about its future leadership and strategic direction has been left mainly in the hands of the interim executive chair of Intel’s board, Frank Yeary, an independent chair. If the Intel board is willing to make such an extreme change as the sudden ouster of its CEO against a backdrop of market uncertainty and intensifying competition, other dramatic changes could lie in the near future.
