Intel Interim Leaders discuss the departure of CEO Pat Gelsinger in an internal meeting

• Intel CEO Pat Gelsinger is no longer at the helm after a challenging four-year tenure.
• The company’s interim co-CEOs addressed the workforce in an in-person meeting on Monday morning.
• An Intel employee described the answers to questions as “vague” and the tone of the meeting as “damage control.”

On Monday morning, Intel employees attended an all-hands-on-hand meeting after receiving an email invitation at 5 a.m. PT.

Accompanying the invitation was news that the company’s CEO, Pat Gelsinger, had resigned on Sunday and would be temporarily replaced by co-CEOs David Zinsner, Intel’s chief financial officer for nearly three years, and Michelle Johnston Holthaus, the new product CEO .

Gelsinger’s move came without warning. He doesn’t stop at slowly exiting or helping to find his replacement. At 9 a.m. the two new co-CEOs were bombarded with questions.

Why did Gelsinger leave so suddenly? What kind of CEO is Intel trying to get now? How can employees trust leadership after repeated missteps?, employees asked.

The man at the center of the conversation was not there. Pat Gelsinger dreamed of becoming Intel’s CEO since he joined the company as a teenager in 1979. He achieved this in an unlikely way, having already been ousted once.

“He was the prodigal son who returned,” described Alvin Nguyen, senior analyst at Forrester. Gelsinger returned as a savior, but now he’s retiring at 63 and Intel is far from saved. Multiple media outlets reported Monday that Gelsinger’s departure was the result of resentment within the board, with Bloomberg reporting that the CEO was given the choice of retiring or being fired from office.

Gelsinger’s departure was a “personal decision,” the executives repeated publicly, according to an employee present.

Intel’s interim leadership brings extensive knowledge of the company’s finances, products and customers.

Zisner has overseen recent cost-cutting efforts and Holthaus has been a believer in Intel for nearly 20 years. But no one at the top has Gelsinger’s technical expertise, which Intel officials have pointed to in their questions. But despite his technical prowess as Intel’s first chief technology officer, Intel remains in critical condition.

The executives emphasized that the company’s goals would not change: employees would improve efficiency and reduce costs, and the company needed to better implement its products and the crucial 18A process.

Holthaus, who the employee said appeared nervous, told employees on the phone that her management style was direct and transparent. She reminded them that she worked at Intel for many years.

Intel declined to comment, but a spokesman referred to Gelsinger’s press release about the departure.

Dealing with Intel’s many failures

According to Edward Jones, Intel has more than 65% of the traditional PC market and 85% of the server market. But serious missteps plague the company. Zisner and Holthaus probably can’t wait until the executive search is complete to get involved.

Helping pass the CHIPS Act and securing promised funding has been a major focus of Gelsinger’s nearly four-year tenure as CEO. However, the funding is contingent on hitting the execution benchmarks that the company has been struggling with.

Last week, the Commerce Department completed its direct funding for Intel under the CHIPS Act totaling $7.865 billion. This funding fell short of the $8.5 billion originally announced.

“While we have made significant progress in restoring manufacturing competitiveness and building the capabilities to become a world-class foundry, we know we still have work to do within the company and are committed to restoring investor confidence,” Frank Yeary, Intel’s interim CEO, said in a statement.

Intel’s overall decline is most evident in the context of the increasing importance of accelerated computing and AI.

In 2021, when Gelsinger took over as CEO, Nvidia shares traded below $30. The GPU designer’s recent rise to one of the world’s most valuable companies has put a spotlight on Intel’s relative absence in the accelerated computing race that Nvidia has come to dominate. Average wages at Intel have remained stagnant compared to other competitors over the past five years as workforce cuts continued.

Gelsinger said last month that the company would miss its goal of $500 million in sales this year from its Gaudi 3 AI chip. However, analysts told Business Insider that 18A, the company’s most advanced manufacturing node, is actually more important to Intel’s resurgence than producing a splash of AI.

“Intel reportedly ‘bet’ the company on 18A for rescue,” Bernstein analysts wrote.

According to Bank of America analyst Vivek Arya, the cost of bringing this node online is likely to continue to rise, and it still needs external validation from large fabless customers. But this costly work is essential to putting Intel back on top and making it an attractive partner for cutting-edge chip designers like Nvidia.

“The importance of bringing production back in-house cannot be overstated,” Futurum Group CEO Daniel Newman told BI. The fate of the company and Gelsinger’s legacy depend on it.

“The cornerstone of Pat’s tenure as CEO was Intel gaining litigation leadership, or at least parity, and if they can’t implement 18A, then it was all for naught,” Logan Purk, senior research analyst at Edward Jones, told BI. Given slow technological advances and cost reductions, as well as fast-moving competition, Intel’s next CEO could inherit a tougher job than Gelsinger.

“It was a difficult situation when Pat came along, and now things are looking much worse,” Bernstein analysts wrote in a note to investors.

No one has witnessed this rollercoaster ride than Intel employees, who have endured multiple waves of layoffs and buyouts.

According to the employee, Monday’s meeting was all about “damage limitation.”

Intel shares fell 60% on Monday compared to the day Gelsinger took over as CEO. However, shares rose slightly following the announcement of Gelsinger’s resignation on Monday.

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