Intel CEO Pat Gelsinger was ousted by the board after poor performance

Intel fired CEO Pat Gelsinger over the weekend, capping a nearly four-year tenure in what was a leading semiconductor company in America before its stock price and market share collapsed.

The company announced Gelsinger’s resignation Monday morning, which people familiar with the matter said followed a contentious board meeting last week about Gelsinger’s failure to respond to Nvidia’s competitive edge and lack of confidence in Gelsinger’s turnaround plan.

Intel CFO David Zinsner and Intel product CEO MJ Holthaus were named interim co-CEOs. Longtime board member Frank Yeary will serve as interim executive chairman. Intel shares were up nearly 4% Monday morning.

“We are working to create a leaner, simpler, more agile Intel,” said Yeary. Yeary was a key driver in Gelsinger’s dismissal, said the person, who requested anonymity to freely discuss the secretive board process. Intel did not immediately return a request for comment on the board meeting.

Yeary, Intel’s longest-serving board member, now has to lead the search process for another CEO. Gelsinger, 63, had a distinguished career at Intel, serving as the company’s first technical chief at the turn of the century, before taking a senior role at EMC. Gelsinger returned to the company from VMware, where he was chief executive, to stabilize Intel in 2021, replacing CEO Bob Swan.

“This has been a challenging year for all of us as we have made difficult but necessary decisions to position Intel for today’s market dynamics,” Gelsinger said in a press release.

The board meeting that led to Gelsinger’s ouster was first reported by Bloomberg.

Gelsinger laid out a brilliant plan when he arrived in 2021 to turn the ailing company into a chip-making juggernaut. He sought to achieve a balance with the two leading chipmakers, Samsung and Taiwan Semiconductor Manufacturing Co. He is chasing big buildouts in the US and around the world, an expensive effort that is heavy on Intel’s free cash flow and increasing the company’s debt burden.

He also persuaded government investment, positioning Intel as the biggest beneficiary of the US CHIPS and Science Act. Government money has started flowing to Intel in recent weeks and will help the company’s chip factories in Arizona and Ohio. Gelsinger’s retirement comes a week after Intel and its CHIPS and Science offices completed a $7.86 billion grant.

Gelsinger also moved to position the company as essential to US national security. He won a multibillion-dollar contract with the Department of Defense to build secure chips, and in meetings with analysts and potential customers emphasized that Intel is a reliable partner of the US government.

But all this was not enough to save investors, who began to see Intel’s aggressive spending as folly.

Investors have become increasingly suspicious of Intel’s prospects, especially as the wave of artificial intelligence raises competition. Nvidia and leave Intel in the dust. The company’s market capitalization has halved by 2021, and briefly crossed $100 billion earlier this year. The company’s stock has fallen 52% year to date.

In August, Intel reported disappointing quarterly results, prompting its biggest selloff in 50 years, and said it would cut more than 15% of its workforce as part of a $10 billion cost-cutting plan. CNBC reports that Intel has engaged counsel to defend itself against activist investors.

There has been no indication yet that activists have taken a sizeable position in the company’s stock, or any sign that there is a new government for Intel’s board. It is not clear what agenda the activists will pursue at the company.

Intel announced plans in September to turn the company’s foundry business into an independent subsidiary, a move that would allow outside funding options. In the same month, Qualcomm made an overture about a possible takeover.

Gelsinger’s successor, when he meets it, will assume command of a smaller and more challenging company than before. Many of the problems that Gelsinger faced were inherited: not pursuing the chipmaking mandate for Apple’s mobile devices and acquiring Nvidia were the only two decisions that the previous leader of Intel reportedly realized put the company at a competitive disadvantage.

The decision was made by Intel’s board and past CEOs. But Gelsinger’s dismissal over the weekend raised new questions about the company’s governance. Lip-Bu Tan stepped down from Intel’s board earlier this year, leaving the company without a director with semiconductor expertise. Numerous reports have emerged in the weeks since detailing the company’s dysfunctional acquisition strategy and boardroom grudges.

– CNBC’s Jordan Novet contributed reporting.