The Death of Intel: When Boards Fail
Pat lost his seat because of an incompetent board. Let's meet them.
If you haven’t heard the news, Pat Gelsinger is “retiring.” The reality is this was not a retirement but a firing of Pat. His brief stint of 1386 days was surprising because not only was he the most technically competent CEO of the last few bad apples at Intel, but he was also among the shortest.
Pat has by no means been perfect, and the conference at UBS kind of showed the frustrations that the board likely had with Pat.
I'd say, the one thing that has definitely come out of the way the Board is thinking about this is, they do recognize and have pushed us that, hey, we made a lot of investments from a capital perspective in foundry, and we need to start seeing some incremental ROIC on those investments. And so and that's what we're committed to do. That's going to be my -- one of my major focuses, definitely, while I'm CFO or as I'm CFO. But of course, in the interim period where I'm CEO, I'll obviously be focused on that as well.
Meanwhile, Pat wanted to pursue the big, bold IFS bet, with 100s of thousands of wafers, when the reality is just getting 10s of thousands of wafers is a massive problem as is. Pat has a bit of an optimistic naivety that comes into play, and I am sure it was likely frustrating. But the reality is he’s the single best candidate for the company.
More importantly than being suited for the job, he wants to do it. It’s probably one of the most challenging jobs in the world, and he’s playing for the hometown. The CEOs who got Intel into this mess were much longer than Pat and a worse fit. Meanwhile, the board let most of his predecessor’s activities go unchecked as they sped through disaster.
This begs the question—what the hell was the board doing? Today, I will talk about Pat Gelsinger, the Intel board, and an example of when boards and short-termism fail. Yes, maybe splitting up the company would result in a better result for shareholders, but it would be much worse for America.
I would liken firing Pat in the final hour of 18A to quitting the final round of chemotherapy in cancer treatment. Instead of seeing the long and painful process through, I think the board will let Intel die and be sold for parts. It’s the correct answer to maximize relatively short-term shareholder value, but it's a nearsighted move that the Intel board specializes in.
So, what does that mean for the storied giant? Let’s dive deeper. Today, I’ll discuss the board, Pat, and where Intel is headed. There are so many clues, and I believe the saddest outcome is the most likely here.
Meet Intel’s Board of Directors
So, it’s time to talk about the board. Remember, we have to consider each board member's key attributes. For this analysis, I’ll be looking at:
Semiconductor experience
Other company/work experience
Tenure at Intel
Meet the board members and committees.
Frank Yeary (Chairman of Board & Chair of M&A)
Frank has been on the Intel board since 2009 and was recently named chair in 2023. He’s the managing member of Darwin Capital and a former Executive Chairman of a corporate advisory firm. He primarily has experience in M&A, 25 of which at Citigroup. He’s a deal guy and was made Chairman of the Board in 2023. He serves on the boards of Paypal and Mobileye. He was on the board of Paypal for the entire Schulman and Donahoe CEO tenure. Schulman almost ran PayPal into the ground.
Although his Semiconductor experience seems limited, he was on Intel’s board for the entire fiasco and chairman of the M&A committee.
Barbara Novick (Chair of Governance & Nominating)
Barbara sits on the all-important nominating committee. She co-founded Blackrock in 1988 (what a flex) and has almost exclusively worked there for her entire career. She joined the board in December 2022.
She has almost no semiconductor experience, is relatively new, and thus is not at fault.
Risa Lavizzo-Mourey (Vice Chair of Nominating)
Meet Dr. Risa Lavizzo-Mourey, who joined the board in March 2018. She has a doctorate in Medicine from Harvard and seems to be a professional board member. She sits on the GE Healthcare and Merck boards. She’s also been on the boards of GE, Better Therapeutics, Genworth Financial, Beckman Coulter, and Hess Corporation.
Her career is not clear to me. She’s a professor of health at the University of Pennsylvania and CEO of one of the largest healthcare philanthropies in the US. She seems to be a professional board member, has no semiconductor experience, and has been around for some of the fiasco at Intel, at least since 2018.
Gregory Smith (Chair of Audit and Finance)
Meet Greg. He’s the former CFO and EVP of operations at Boeing. He’s been on the board since 2017 and was an interim CEO at Boeing during 2020. He also sits on the American Airlines board and is Chairman there. He sits on the Sierra Nevada Space Corporation board as well.
He has almost no semiconductor experience and could probably be directly involved with the Boeing fiasco. He’s been on the board for the entire Intel disaster and, at one point, was interim CEO of Boeing, so he's likely not the most focused member.
Dion Weisler (Chair of Talent & Comp)
Dion Weisler joined the board in 2020. He also sits on the board of BHP and Thermo Fischer. He was CEO of HP from 2015 to 2019 and has a Bachelor of Applied Science in Computing. He’s relatively new and has some experience in computing but not precisely semiconductor experience. I would consider him a decently qualified candidate, and he has not been on the board for most of the Intel disaster.
James Goetz
James Goetz is a partner at Sequoia and joined the board in November 2019. He has previously served on networking-focused boards. He has a degree in electrical engineering, is likely semi-technical, and understands the industry. He’s relatively new but likely does not have a technical background. He’s been on the board long enough to be partially to blame.
Andrea Goldsmith
Andrea Goldsmith joined the board in September 2021. She is a professor of electrical and computer engineering at Princeton. She’s been a CTO and cofounded previous technology companies, including one for high-speed wireless networking. She also sits on the board of Medtronic and Crown Castle.
She’s relatively new but qualified in the semiconductor space. She hasn’t been around since the disaster.
Alyssa Henry
Alyssa joined the board in 2020. She was Square's CEO for 9 months, from February 2023 to October 2023. She previously worked at Amazon, serves on the Confluent board, and formerly was on the Unity board (lol).
She’s new and unqualified in semiconductors, and she’s had a rough career. Nine months as CEO and then out is not exactly a great look.
Omar Ishrak
The board's former chairman Dr. Omar stepped down in January 2023. He’s been on the board since 2017 and was chairman from 2020 to 2023. He’s the former CEO of Medtronic and retired in 2020. Before Medtronic, he worked at GE.
He has no semiconductor experience, and he was around for the entire disaster and was the chairman, the man with the most power to change the board. He’s very much at fault and still on the board.
Tsu-Jae King Liu
Tsu-Jae King Liu joined Intel’s board in 2016. She’s an engineering professor at Berkeley and sits on the Maxlinear board. She has heavy semiconductor experience but no industry experience. She was around for the entire Intel disaster.
Stacy Smith
Stacy Smith has been on the board since March 2024 and fills Lip-Bu Tan’s spot. He serves as the chairman of Kioxia and chair of Autodesk. Stacy is one of the few in the industry with semiconductor experience. Sadly, it’s from within Intel.
He’s a new seat, and so is not exactly to blame. The thing that does suck is his background is not exactly great. He is the Chairman of the Autodesk board, which currently has an activist investor because it’s poorly managed. He also is on the Wolfspeed Board (which is poorly managed). So he has experience, but his other experiences don’t look that great.
The incoming board members are both super technically skilled, but I want to focus on the backward-looking board for this analysis. Eric Meurice and Steve Sanghi are very qualified but just got there.
Thoughts on the Board
The board is pretty horrific. Most of the people have no technical expertise, and many of the people most at fault for getting Intel to where it is, are still on the board.
Let’s take a second to acknowledge that Boeing's EVP of operations is the audit committee head and has been on the board for the entire fiasco. That’s probably the only other American giant having as bad a time as Intel!
There are many Medtronic-related members, people with medical backgrounds, and what it looks like to be a professional board member. An average panel of semiconductor professionals would likely be more qualified to manage the board than the current board!
The most senior board members (responsible for the disaster) are in positions of power, and the former chairman is still on the board. He should be fired. The lack of semiconductor experience is staggering. Only one person with industry and semiconductor experience isn’t a professor; they joined this year. This is a disaster board, and the blind are leading the seeing. That’s why Pat got fired; the board doesn’t know what it’s doing. Pat’s faults are real, but how could he get objective feedback from this board?
What’s more, there’s an interesting and evident dynamic with the new chairman. My quick read on the situation is that the new Chairman got his job in 2023, only 2 years after Pat got the job. And when you’re an incoming chairman, you don’t sound smart by saying, “Let’s continue the strategy that will have to cut to the bone to save the patient.” You sound a lot smarter coming in with a change plan, and given Frank's M&A background, his ideas will likely always be based on M&A, so it’s time to sell the company for parts.
So Frank did what deal guys do: He looked for some deals. We’ve heard the rumored Qualcomm buyout and Altera sale, so we know the board is looking for options. But how does that impact Pat? I think the key is actually in a Stratchery Interview. Check out this interview excerpt.
Pat Gelsinger: Let me give maybe three different answers to that question, and these become more intellectual as we go along. The first one was I wrote a strategy document for the board of directors and I said if you want to split the company in two, then you should hire a PE kind of guy to go do that, not me. My strategy is what’s become IDM 2.0 and I described it. So if you’re hiring me, that’s the strategy and 100% of the board asked me to be the CEO and supported the strategy I laid out, of which this is one of the pieces. So the first thing was all of that discussion happened before I took the job as the CEO, so there was no debate, no contemplation, et cetera, this is it.
The strategy has changed at the top, and now the chairman thinks it’s time for a “PE kind of guy” because IDM 2.0’s grand vision has sailed, and now it’s time for a deal.
There are more signs as well. Intel has an activist defense campaign, meaning the board feels pressure. The Qualcomm and Altera rumors were clearly leaked, and Intel is likely looking for outside buyers. The chairman’s strategy is to sell as much as he can. What is confusing is that the recent CHIPs Act funding also has heavy sale restrictions. The vultures are circling, and Pat has said publically, “I’m not that CEO,” so the board decided enough is enough.
The board has decided to gut Intel. Four former board members wrote an OpEd about splitting the company in two. The winds of change are clearly to abandon IDM 2.0, and Pat doesn’t fit into that picture. Now, here’s the thing - I do think that gutting Intel makes sense for shareholder value. Hell, selling Altera and accelerating the sale of Mobileye is an obvious move. A sum of the part thesis there probably works, as Intel’s stake in Mobileye, Altera, IFS, and Design all are worth something, and that’s probably higher than the share price today.
But the reality is that outcome also sucks and feels extremely short-term oriented. I would argue that this is the right move in the short term, “value creation,” but in the long term, there couldn’t be a worse outcome for shareholders, industry partners, and, importantly, America.
This is the board's failure, but I have to ask: who hires them exactly?
When Boards Fail
The board isn’t qualified. Let’s contrast the above resumes with Pat’s. Pat was the CTO of Intel in its heyday, the chief architect of the i486 that saved the company, and probably one of the most decorated electrical engineers of all time. On the other hand, the board is run by a group of people with no semiconductor experience, and some are legitimate undermanagement scenarios (Boeing, Autodesk, Paypal).
The board's chairman has been involved in the entire debacle since 2009. He could have voted against Pat getting the job over Brian Krzanich in 2009. But this is where things get interesting—while boards are a way to govern boards effectively, they are not perfect.
The board has almost unanimous votes for “yes” despite royally screwing up the company year after year. And why is that?
I will take another step deeper than the board, and that’s the investors. Most large investors vote alongside Glass Lewis and ISS recommendations, the two most prominent proxy solutions for investors. Most GL/ISS recommendations tend to vote with the board and don’t change much unless something drastic happens. If you’re a passive investor, you vote in line with the two proxy powerhouses.
Intel’s board has been running on autopilot for a long time. There should have been an activist sooner. The problem (and I have talked to activists) is that the ship is tough to turn around, and the odds are you don’t make money. So, the risk reward is pretty bad, and fixing the company means treading water, not a homerun in equity returns.
Ironically, most investors look at the Intel situation and rightfully say, “Wow, that is way too hard,” and that’s the problem. Why fix when you can flee to the 1000s of other company’s stock? The people who left owning the company are primarily passive investors who will vote with Glass-Lewis and ISS. The top 3 shareholders are passive, with 30% of the vote, and going down the list of shareholders, it’s clear there’s not much active ownership in the company.
The ship captain (shareholders) are asleep, and most who are smart enough to care to know to avoid the neighborhood that’s Intel. Meanwhile, the board made voting recommendations yearly, and Glass Lewis and ISS went with the board. Intel’s board is being run on autopilot, and that’s how we got the list of supremely unqualified board members. This is an excellent example of how boards fail. No one raised their hand to stop the autopilot, and now the formerly greatest American semiconductor company is in shambles.
They have fired the technical leader they needed to turn around Intel. There are valid reasons, as Pat’s naive optimism can feel delusional. It never felt like he never truly acknowledged the problem at hand and had visions of old Intel in his head. But he wanted to do the job, and that’s hard to say for most people. Meanwhile, the transcript out today talking about “rightsizing utilization” implies that the Board didn’t like his grand plans (overly optimistic plans) for IFS and saw the product imploding. At the same time, the CEO focused on the loss-making part of the business.
But that’s the thing—the profitable part of the business is commoditized and will only worsen. I would argue that it’s a former monopoly that has become commoditized and will soon become worse. It makes sense to focus on the future, and IFS could have been one of two (TSMC) instead of a product group, which is one of many. The moonshot has always been IFS; now it’s time for plan B. And I frankly find Plan B to be uninspiring.
Things are changing fast. They just appointed two new board members, the former CEO of ASML and the current interim CEO of Microchip, to the board. This is an excellent step in the right direction, but it’s like hiring a surgeon and an oncologist after the cancer has moved to stage 4. It might be too late, but it sure is the right direction.
Where Intel Goes from Here
I think where Intel goes from here will be interesting. Read more below the paywall.