Intel is going to cut itself

Author | Li Shuaifei

Intel is searching for a new CEO.

Recently, according to foreign media HEXUS, a Reddit user named uzzi38 released a transcript of an investor and analyst meeting held by the well-known investment institution SIG (Susquehanna International Group, LLP). At this meeting, SIG announced the above news.

The report believes that the news is quite reliable, although it is not an official statement.

Leifeng.com found out from Reddit that according to the transcript, Intel has rejected one of the options for the new CEO, but it still has three other candidates - not only that, the content also claims that Intel will make the final decision after the financial report is released in January next year.

So, does Intel need a new CEO today?

The role of Intel CEO is a crucial one both for Intel itself and for the entire semiconductor technology industry - and today, this role is being played by Bob Swan.

Interestingly, Bob Swan's appointment as Intel CEO was related to a sex scandal that occurred at Intel.

On June 21, 2018, Intel released a statement on its official website that Brian Krzanich, then Intel CEO and director, would no longer serve as CEO due to a close relationship with an employee within the company that violated company policy.

At the same time, Bob Swan, then Intel CFO, served as Intel's interim CEO, effective immediately.

So, who exactly is Bob Swan?

Leifeng.com learned that Bob Swan was born on May 9, 1960 in Syracuse, New York, USA. He holds a bachelor's degree in business administration from the University at Buffalo and an MBA from Binghamton University.

He began his career at General Electric in 1985 and held various senior financial management positions over 15 years; he later served as vice president of finance or CFO at several companies, including eBay and HP Enterprise Services - he also served as an operating partner at General Atlantic.

Bob Swan joined Intel in October 2016 and still serves as CFO.

However, because of the above-mentioned romantic incident in 2018, he was transferred to the position of Intel's interim CEO. In this way, Bob Swan, who has rich experience in financial management, became the temporary helmsman of Intel's semiconductor ship.

It is worth mentioning that shortly thereafter, Bob Swan expressed that he did not want to serve as CEO for a long time.

However, things are unpredictable - on January 31, 2019, seven months after serving as Intel's interim CEO, Bob Swan officially took over as Intel's CEO.

Following the announcement, Bob Swan wrote an open letter:

We must be bold and fearless. The Intel team has the technology and strategic vision to shape the future of technology. Our ambitions have never been greater, but we still have a relatively small share of the largest addressable market in Intel's history. The world is becoming increasingly data-centric, and all data needs to be processed, transmitted, stored, and analyzed.

Through this letter, Bob Swan tried to boost morale throughout Intel.

It is worth mentioning that in the 52 years since Intel was founded, it has had a total of 7 CEOs; before the current Bob Swan, all Intel CEOs had more or less engineering experience or technical background.

Bob Swan is the only Intel CEO with a finance background.

As a CEO who started out as a CFO, Bob Swan is better at looking at issues from a financial perspective.

In fact, after becoming the CEO, Bob Swan made drastic changes in many aspects of Intel's business development, among which his three knives attracted the most attention.

Among them, the first thing he did after taking office was to cut off Intel's 5G baseband business.

Leifeng.com learned that on April 16, 2019, the same day that Apple announced a settlement agreement with Qualcomm, Intel immediately announced its withdrawal from the 5G smartphone modem business. Previously, Intel and Apple did not make much money from their cooperation in the 4G baseband business, and the 5G baseband was already difficult to produce.

At the time, in an interview, Bob Swan said:

Intel gave up the modem business because Apple and Qualcomm had reached a settlement, and without Apple as a major customer, Intel could not see a way forward.

Not only that, Intel will soon auction about 8,500 intellectual property patents related to cellular network connections, including 3G/4G/5G related patents - which were finally acquired by Apple for US$1 billion in July.

This operation has the meaning of stopping losses in time and realizing cash quickly.

The same operation also occurred when Intel abandoned the Nervana AI chip. The chip was acquired by Intel in 2016, but later it was not satisfactory in terms of technology development, product performance and commercial use. Finally, in February 2020, Intel announced that it would abandon Nervana and support the latest acquired Habana Labs products, which caused an uproar in the industry.

It is worth mentioning that it took Intel less than two months from acquiring Habana Labs for $2 billion to using it to replace Nervana - for a large company like Intel, making a decision in such a short time is extremely fast.

Under Bob Swan's leadership, Intel also swung the third knife in October 2020, cutting off Intel's NAND flash memory business for US$9 billion - it is worth mentioning that in this transaction, Intel also sold its NAND flash memory manufacturing plant in Dalian, China.

In fact, this is Intel's only wafer manufacturing plant in Asia.

In this regard, Bob Swan said:

This transaction will enable us to further focus on investing in differentiated technologies, thereby playing a larger role in our customers’ success and generating attractive returns for our investors.

Judging from these words, this deal is indeed in line with Bob Swan's style of doing things.

Bob Swan is undoubtedly an experienced leader; but for a giant technology company like Intel, he also has shortcomings.

In fact, as early as May 2019, industry insiders were concerned about whether Bob Swan could lead this well-known Silicon Valley technology company to face market opportunities and challenges.

For example, Martinwolf analyst Marty Wolf believes that Bob Swan may be a good employee, but what Intel needs is a strong technical leader; and Wedbush technology industry analyst Joel Kulina also said that whether in the past or now, what Intel needs is people with a technological background and a good way to execute affairs.

Bernstein Research analyst Stacy Rasgon said:

Intel's former CEO left a lot of messes for Swan to clean up, which shows that technology-oriented leaders are not necessarily better; however, Swan must also admit that he does not have the ability to judge when making technology-related decisions and should leave it to the technical team to make judgments.

The analysts' opinions are worth referring to, but what can truly test Bob Swan's strength is Intel's business development - from the current situation, Intel's business development is not going smoothly.

The most criticized issue is the delay in process technology.

In fact, Intel had already delayed the development and mass production of 10nm chips for several years, causing AMD to gain an advantage over TSMC. In May 2019, at Intel's Investor Day, Bob Swan said that Intel would produce and launch a 7nm product in 2021, in addition to 10nm chips in 2019.

However, the 10nm problem was solved, but the 7nm problem encountered serious difficulties.

In July 2020, after Intel's Q2 financial report, Bob Swan announced a piece of negative news: due to serious yield problems in the 7nm process, the company was 12 months behind in manufacturing; although the delay time could be halved to 6 months through more flexible chip design, 7nm would not be mass-produced until the end of 2022 at the earliest.

You know, AMD next door has already taken advantage of TSMC and is doing very well in 7nm processors; but Intel is still hesitant about whether to outsource processor manufacturing.

As soon as the news came out, Intel's stock price plummeted by 16.24% - don't forget, its Q2 performance was actually very good.

It is particularly worth mentioning that just before and after Intel’s stock price plummeted, AMD’s stock price surpassed Intel.

Later in Q3, Intel's financial performance had problems again - its revenue and net profit fell by 4% and 28.6% respectively; due to being lower than expected, Intel's stock price fell by 10.58%, and its market value evaporated by US$24.2 billion overnight.

In fact, if you compare Intel's current stock price (46.36 on December 21 this year) with the stock price when Bob Swan just became a regular shareholder (48.73 on February 1 last year), you will find that it has basically remained at the same level, with a slight decline - in contrast, in the same time period, AMD's stock price almost quadrupled (from 24.51 to 95.94).

From this perspective, Bob Swan failed to save Intel's stock price.

Of course, stock price changes are only an external evaluation measure to judge whether a company's leaders are leading the company into the future.

For the giant ship of Intel, what really matters is whether Bob Swan, as its leader, can lead it out of the quagmire of backward 7nm process technology, and make breakthroughs in technology and business development, so as to keep up with or even lead the pace of history.

But judging from the current situation, Intel is not having a good time in 2020.

Not only that, just recently, there was bad news in the market:

After Apple Mac switched to its own M1 chip, Intel's old ally Microsoft is also developing its own ARM-based chips for servers and Surface devices, which directly caused Intel's stock price to fall by more than 6%.

I'm afraid Bob Swan won't feel very good after hearing this news.

But in any case, as a world-class chip giant, Intel still has huge technical strength and inherent advantages, and also has enough opportunities to achieve a successful transformation for the future. What Intel really needs is actually the change that Microsoft CEO Satya Nadella talked about in his book "Refresh".

In the process of corporate transformation, the role of CEO is undoubtedly extremely critical, just as Satya Nadella is important to Microsoft today.

However, no matter what the outside world thinks, Intel will eventually make its own decision on the choice of CEO, and it is probably too early to evaluate Bob Swan now.

Let time give Intel an answer.

References for this article:

• https://old.reddit.com/r/AMD_Stock/comments/kdmpac/charlie_demerjian_on_twitter_call_with_susquehana/

• https://hexus.net/tech/news/industry/147171-tech-industry-insiders-say-intel-looking-new-ceo/

• https://www.leiphone.com/news/201905/uwPjyae1LY9I99YX.html

• https://newsroom.intel.com/news/bob-swan-open-letter-president-elect-biden/

• https://newsroom.intel.com/biography/robert-h-bob-swan/