Intel Interim Leaders Address CEO Pat Gelsinger’s Exit in Internal Meeting

• Intel CEO Pat Gelsinger is out after a challenging four-year tenure.
• The company’s interim co-CEOs addressed the workforce on Monday morning in an all-hands meeting.
• An employee described the responses to questions as vague and the meeting’s tone as “damage control.”

On Monday, after receiving an email invite at 5 a.m. PT, Intel employees joined an all-hands meeting.

Accompanying that invite was the news that CEO Pat Gelsinger had stepped down on Sunday and would be temporarily replaced by two co-CEOs: David Zinsner, who’s been Intel’s chief financial officer for nearly three years, and Michelle Johnston Holthaus, the new CEO of product.

Gelsinger’s move came without warning. He isn’t transitioning out slowly or staying on to help with the search for his replacement.

Come 9 a.m., employees bombarded the new co-CEOs 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?

The man at the center of the conversation wasn’t there. Being the CEO of Intel had been Gelsinger’s dream since he joined the company as a teenager in 1979. He achieved it improbably, after leaving once.

“He was the prodigal son returning,” said Alvin Nguyen, a senior analyst at Forrester. Gelsinger returned a savior, but now he’s retiring at 63, and Intel is far from saved. Multiple news outlets described Gelsinger’s departure as the result of board rancor, with Bloomberg reporting that the CEO was given the choice to retire or be removed from the job.

Executives in the all-hands meeting repeated that Gelsinger’s departure was a “personal decision,” a current employee in attendance said.

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

Zinsner oversaw a recent cost-cutting effort, and Holthaus has been steeped in Intel for nearly 20 years. But no one at the top has the technical expertise of Gelsinger, something Intel employees pointed out in their questions. But despite Gelsinger’s technical prowess — he was Intel’s first chief technology officer — Intel remains in critical condition.

The leaders emphasized that the company’s goals wouldn’t change: Employees would improve efficiency and reduce costs, and the company would execute better with products and with its crucial 18A process.

Holthaus told employees on the call that her leadership style was direct and transparent, the employee in attendance said. She reminded them that she’s worked at Intel for many years.

Intel declined to comment, but a spokesperson pointed to a press release announcing Gelsinger’s departure.

Contending with Intel’s many misses

Intel has more than 65% of the market for traditional PCs and 85% of the server market, according to Edward Jones. But critical missteps plague the company. Zinsner and Holthaus likely can’t wait for an executive search to conclude to address them.

Supporting the passage of the CHIPS Act and obtaining its promised funding was a focus of Gelsinger’s nearly four-year term as CEO. However, the funding is contingent upon hitting execution benchmarks, with which the company has struggled.

Last week, the Department of Commerce finalized its direct funding for Intel under the CHIPS Act, totaling about $7.9 billion. That funding fell short of the original amount of $8.5 billion, announced in March.

“While we have made significant progress in regaining manufacturing competitiveness and building the capabilities to be a world-class foundry, we know that we have much more work to do at the company and are committed to restoring investor confidence,” Frank Yeary, now the interim executive chair of Intel’s board, said in a statement.

Intel’s overall fall from grace is most apparent in the context of the increasing importance of accelerated computing and AI.

In 2021, when Gelsinger took over as CEO, shares of Nvidia were trading below $30. The GPU designer’s recent rise to one of the most valuable companies in the world has put a spotlight on Intel’s relative absence from the accelerated-computing race that Nvidia has come to dominate. Compared with competitors, the median pay at Intel has remained stagnant over the past five years amid employee cuts.

Gelsinger recently said that the company would miss its target of $500 million in sales this year of its Gaudi AI chips. But analysts told Business Insider that 18A, the company’s most advanced manufacturing node, was actually more important to Intel’s resurgence than its making a splash in AI.

“Intel has ostensibly ‘bet’ the company on 18A for salvation,” Bernstein analysts wrote.

The costs of bringing this node online are likely to increase further, and it is “still to get any external validation from large fabless customers,” said Vivek Arya, a Bank of America analyst. But this expensive work is essential to bring Intel back to the cutting edge and make it an attractive partner for chip designers like Nvidia.

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

Logan Purk, a senior research analyst at Edward Jones, told BI: “The cornerstone of Pat’s tenure as CEO was built upon Intel achieving process leadership or at least parity, and if they cannot execute with 18A, then it was all for naught.” Given slow-moving technological progress and cost-cutting, and fast-moving competitors, Intel’s next CEO may be inheriting a harder job than Gelsinger had.

“It was a tough situation when Pat showed up,” Bernstein analysts wrote in a note to investors, “and things look much worse now.”

No one has been a closer witness to this roller coaster than Intel employees, who have seen several waves of layoffs and buyouts.

The employee said Monday’s meeting had the distinct flavor of “damage control.”

Intel shares were down by 60% on Monday compared with the day Gelsinger took the CEO job. But shares jumped slightly on the announcement of Gelsinger’s retirement.

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