Trouble In Silicon Valley

Intel’s CEO Bob Swan has become a lame duck. Just days before Swan was expected to unveil Intel’s new manufacturing strategy and quarterly earnings, the semiconductor pioneer announced Swan will be replaced by VMWare CEO Pat Gelsinger. Et tu, Apple?…

Oliver Rogers
Trouble In Silicon Valley
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Intel’s CEO Bob Swan has become a lame duck.

Just days before Swan was expected to unveil Intel’s new manufacturing strategy and quarterly earnings, the semiconductor pioneer announced Swan will be replaced by VMWare CEO Pat Gelsinger.

Et tu, Apple?

A rarity among its big-tech peers – Intel had a crushing 2020. The company saw $60 billion of value wiped off its market cap while rivals’ stocks soared.

In July, the company confessed it was 12 months behind schedule in developing its latest generation of chips, sending shares lower by 17%. The pain is widespread:

  • Intel has fallen behind international rivals Taiwan Semiconductor and Samsung in the chip technology war.
  • Another crushing blow came in July when Apple dumped Intel in favor of using its own, more efficient chips developed in-house.

Intel relinquished its cherished title as the U.S.’s most valuable semiconductor company to Nvidia in 2020. Now Nvidia’s market cap is more than $100 billion larger than Intel’s.

Silicon Shakespeare

To cap it off, in December activist hedge fund Third Point lobbed in a letter imploring the company to reconsider its strategy. Hedge funder Dan Loeb said management has been allowed to “fritter away” key advantages and “Stakeholders will no longer tolerate such apparent abdications of duty.”

The hedge fund has built up a $1 billion stake in Intel, and pushed the CEO to consider breaking up the company or selling off assets.

The Takeaway: Third Point banked itself an immediate return on news of Swan’s departure. Intel stock jumped 12% to $59.51, suggesting the market sees the kick in the pants delivered by the company’s activist investor as a much needed development.

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