By Asa Fitch
Intel Corp. ousted Chief Executive Bob Swan in a surprise move after activist hedge fund Third Point LLC urged sweeping changes at the company to revive the U.S. semiconductor giant's fortunes.
Intel on Wednesday said Mr. Swan would be replaced by VMWare CEO Pat Gelsinger effective Feb. 15. Mr. Gelsinger once served as Intel's technology chief.
Mr. Swan joined Intel in 2016 as chief financial officer. He was named interim CEO two years later and formally given the top job in January 2019. CNBC earlier reported Intel was replacing Mr. Swan.
Third Point Chief Executive Daniel Loeb in a December letter to Intel Chairman Omar Ishrak said the company's woes could threaten the U.S. tech industry and urged the chip maker to consider alternatives, including selling some of its acquisitions and splitting its design and manufacturing operations -- a move that would end Intel's long-held status as America's leading integrated semiconductor maker.
"After careful consideration, the Board concluded that now is the right time to make this leadership change to draw on Pat's technology and engineering expertise during this critical period of transformation at Intel," Mr. Ishrak said in a statement.
Third Point's action came at the end of a year that saw Intel lose its status as America's highest-valued chip company and the chip maker suffered more product delays. Intel also faces growing competitive pressure from rivals such as Nvidia Corp., which has surpassed Intel in market capitalization, lost market share to former distant rival Advanced Micro Devices Inc., and was dumped by Apple Inc. as the supplier for its Mac computer processors.
Intel has fallen behind Taiwan Semiconductor Manufacturing Co. and South Korea's Samsung Electronics Co. in the race to make the most cutting-edge chips. TSMC makes chips under contract for some Intel competitors, including Nvidia and AMD.
Intel last year said it would consider outsourcing the manufacturing of some of its most advanced chips. The company is expected to decide next month where it will make future generations of processors.
Despite the setbacks, Intel has said it expects to post record sales for 2020, boosted by pandemic-era demand for PCs and cloud computing. Intel shares retreated around 17% last year when the stock in many of its rivals soared. Shares were up 8% in early trading Wednesday.
Third Point has said it has roughly $1 billion stake in Intel. In its letter, Mr. Loeb said Intel had made acquisitions that failed and that the company's board had allowed management to "fritter away" advantages. "Stakeholders will no longer tolerate such apparent abdications of duty, " he wrote. He also expressed concern Intel was losing chip design talent.
The U.S. has become increasingly concerned about losing its edge in a technology cold war playing out against China and the erosion of U.S. chip-making in particular. American lawmakers last year moved to help finance domestic chip-making capacity.
Intel also said when it posts fourth-quarter earnings next week that sales and per-share earnings would top the guidance issued in October. Intel is on track for a record year in revenue. It also said it has made progress in developing its newest generation of chips where it had struggled.
Write to Asa Fitch at firstname.lastname@example.org
(END) Dow Jones Newswires