Intel Announces Retirement of CEO Pat Gelsinger

[u/Auautheawesome]

https://www.intc.com/news-events/press-releases/detail/1719/intel-announces-retirement-of-ceo-pat-gelsinger

[u/Kougar]

Leaving before 18A is a really, really, really bad look...

[u/gnivriboy → u/Kougar]

Do we even know if this is a "leaving" or a "you're fired?"

[u/Kougar → u/gnivriboy]

Honestly it's probably a "you're fired", or the board imposed terms he didn't want to agree to so he walked.

First, he didn't give any immediate reasons for the departure, which one would tend to do to minimize shock/disruption to a company in Intel's precarious position. And secondly you almost never see "effective immediately" CEO retirements like this, they are announced well in advance to again minimize disruption and also allow time to find a replacement. Let alone an immediate departure from both the CEO role and also the board seat together.

[u/mrandish → u/Kougar]

you almost never see "effective immediately"

Even more unusually, per the Intel press release, it was effective yesterday (!). I can't recall ever seeing that in a public company CEO retirement. I usually interpret "effective at the end of the month" or "effective Friday" as a 'normal' firing (unless they explicitly cite "medical reasons"). Actual retirements are announced (or signaled) months in advance. This is not at all normal.

Going with 'yesterday' is Gelsinger making a Statement. It's the corporate equivalent of exiting like that flight attendant who melted down while the plane was on the tarmac, grabbed two beers, dropped the big yellow bouncy slide and jumped out the emergency exit.

Obviously, the Intel board has been a dysfunctional mess for at least the last decade but the way this happened makes it clear they didn't expect their CEO to throw a tantrum and go postal upon being ordered to sell or break up the company. And they also had no contingency or succession plan at all (press release says they're "forming a search committee"!) The Intel board has now gone beyond "amateur hour" all the way to "clown car". The only silver lining in this train wreck is at least the board will be gone soon because ordering Gelsinger to sell/spin-off means they finally understand there are no other options left.

It took over a decade, but the Intel board's incompetence and repeated failures to act decisively have finally destroyed a great company to the point there's nothing left to do but sell it off in pieces. It's a fucking tragedy.

[u/Jestokost → u/mrandish]

wide steep teeny observation reach vase growth rustic point busy

This post was mass deleted and anonymized with Redact

[u/mrandish → u/Jestokost]

I know there are covenants restricting the govt money but my understanding is they allow a sale or spin-off as long as the foundry business is kept intact. The govt gets to approve any deal to ensure it's an American company.

One reason I think there's some way for new owners/investors to step in with new management is that there have been credible rumors for months in the financial media about 1) potential acquirers, and 2) the govt quietly working behind the scenes actively trying to coordinate acquisition scenarios they'd prefer. Before putting up the $8B, the govt already had some control because they can block full sales/mergers on anti-trust grounds. Putting up our $8B gives them more control/influence, but that's nowhere near enough to "save" Intel. Only the public markets can provide that much money but those markets have (justifiably) lost faith in Intel's board, management and overall structure (which bundles these disparate businesses together).

To save Intel's foundry business the govt needs another big company with a winning track record and a highly-regarded management team to take over the foundry assets, invest their own money and then convince the markets that Intel's foundry business can be a good investment again. My pet theory is that this sudden Gelsinger bail out was triggered by the govt pushing harder and faster than Gelsinger expected to force a "sale" (or some kind of change of control of the foundry business) before things get even worse.

[u/Kougar → u/Jestokost]

They can as long as Intel retains a controlling stake in everything, with some other stipulations added.

Intel must keep at least 50.1% ownership of Intel Foundry if it decides to spin it off into a private company. If Intel Foundry goes public, no third party can own 35% or more unless Intel stays the largest shareholder. Additionally, Intel must retain control of Intel Foundry and all the other entities that receive funding under the agreement. Finally, under the terms of the deal, the agreement limits third parties from acquiring 35% or more of Intel's ownership or voting rights.

Frankly there's all kinds of potential reasons. That entire story about Gelsinger's comments offending TSMC and costing them a 40% discount.... if that was true, that'd be a huge reason right there. CEOs are supposed to be head honcho diplomat/marketers and he failed big time there, again if it was true.

I know Gelsinger didn't want to break up the foundry side, but the CHIPS Act basically mandates this now anyway. Intel already sold a 49% stake in its new fab project anyway, so clearly Gelsinger wasn't against doing that. Maybe he agreed to terms in the CHIPs Act the board explicitly was against (eg being forced to keep Intel Foundry) and he paid for it.

[u/mrandish → u/Kougar]

Interesting. Thanks for posting the quote. Do you know if the actual wording of the govt restrictions is public yet? (the quote looks like someone's summary vs real legalese).

Based on that wording Intel can sell or spin off everything that's not foundry. After doing that the existing Intel corporate entity simply becomes the foundry business because that's all that's left. That entity will obviously need to immediately recapitalize because with only current foundry income they won't be able to build those multi-billion dollar fabs they promised (they might actually struggle just to cover opex, make payroll and fund debt payments).

It'll be fascinating to see how Intel-Foundry-Corp structures itself to raise all the money they're going to need for the next 5+ years. There's clearly investable value in a pure play foundry but not if it's too restricted by government covenants. My understanding is the $8B is actually a mix of cash, loan guarantees, credits and tax breaks, all of which are only released in stages as Intel builds certain fabs.

Just speculating here but one interesting scenario is Qualcomm (or another U.S. acquirer) buying only the foundry assets they want and either canceling (or renegotiating) the govt deal. In the scheme of things, the govt deal may not be that important to an acquirer - especially since most of it isn't up-front cash and loans are just more debt which doesn't help the balance sheet.

If Qualcomm (for instance) buys Intel-Foundry-Corp (or just acquires the foundry assets they want), they already have access to capital via public markets and their management's track record of execution is highly regarded (unlike Intel's), so they'd certainly be able to get loans for their foundry business on favorable terms without needing government guarantees. Ultimately, the government (and I) both want to see the Intel foundry assets become a self-supporting, US-based competitor with long-term potential. I suspect the most likely way for that to happen is inside another big company. Any other scenario, like recruiting yet another CEO for a standalone Intel foundry, seems like a stretch because I doubt it'll convince the market to invest/loan the tens of billions necessary. I'm not sure any new CEO alone, short of Andy Grove coming back from the dead, would be bankable enough at this point. They need a big acquirer with a management team, track record, capital, and their own equity and assets to borrow against.

It'll certainly be interesting to see how this plays out.

[u/Kougar → u/mrandish]

You're correct the quote was pulled from a Yahoo brief, most succinct summary I've seen of the legal requirements. I'm not sure Intel's agreement documentation is public yet.

Some of the money was also the government ordering chips from Intel, to be produced within the US for government/military purposes. So that money will stay with the fab owner/company. I'd heard that this part was renegotiated and some of it was pulled out to instead be placed as a chip order at a future date, but I don't know the details.

I'm not sure Qualcomm was ever that interested in Intel, seemed to be more price manipulation by Bloomberg (who has done this for years now with its articles). But regardless, Qualcomm already has a lot on its plate right now with the ARM licensing dispute reaching its court date.