It was a tough day to be the top executive of a multi-national corporation with a market cap above $35 billion.
Chipmaker Intel announced today that CEO Pat Gelsinger is retiring after four years at the helm of the beleaguered tech company. Then again, “retiring” may not be the right word: Bloomberg first reported the Board effectively pushed out Gelsinger after a heated discussion about the firm’s future.
Shares jumped on the news of the departure, though they ended the day down 0.50%. CFO David Zinsner and Intel products CEO MJ Holthaus will be the interim co-CEOs.
What went wrong: Intel’s market share has deflated since Gelsinger was first appointed CEO in 2021. The company failed to gain an edge in the hyper-competitive AI market, and shares plummeted 61% during his tenure.
But are all of Intel’s woes Gelsinger’s fault? Not necessarily. Some of the firm’s biggest fumbles, including passing on an acquisition of Nvidia in 2005 and deciding not to make chips for Apple phones, were made before he became CEO.
How to fix it: According to Citi Research lead US semiconductor analyst Chris Danely, Intel’s foundry business (manufacturing chips for other companies that Intel itself didn’t design) is what’s holding it back, and a new CEO should exit it completely for there to be any chance of a comeback.
“We estimate if Intel exits the foundry business, the company could ultimately see EPS in the $3-$4 range and gross margins somewhere in the low-to-mid 50% range,” Danely wrote in a note today, reiterating his neutral rating and $25 price target.
Stellantis’ not-so-stellar quarter
Intel isn’t the only company losing its top exec after lagging behind while competitors ushered in a new golden age.
Making sense of market moves
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After taking the top job in 2021 following the merger between Fiat Chrysler Automobiles and PSA Group, Stellantis CEO Carlos Tavares resigned suddenly over the weekend—also following disagreements with the firm’s board. A new interim executive committee will be led by Chairman John Elkann.
Shared dipped 6.47% today on the news, and the stock has fallen 46% in 2024.
The auto conglomerate, which operates brands like Chrysler and Jeep, reported decelerating revenue and a 20% decline in year over year car sales in its third quarter.
But investors aren’t betting that a new CEO behind the wheel will lead to a turnaround just yet. The sudden executive shakeup reads more like internal chaos than a decisive plan for the future, according to analysts.
“We struggle to identify any scenario under which these events can be positively spun as far as the stock price is concerned,” wrote Bernstein analyst Daniel Roeska in a note.
The big picture: There’s plenty of blame to go around when a company is in a rut—but the CEO has the ultimate responsibility over its direction. The easiest way for a company to signal to investors it’s getting a fresh start is with a new top executive.—LB