MW Intel's stock soars as Lip-Bu Tan is named CEO. But he faces a tough task ahead.
By Emily Bary and Therese Poletti
With a permanent CEO, Intel now has some stability. But turning around the design and manufacturing businesses won't be easy.
Months after leaving Intel Corp.'s board of directors, Lip-Bu Tan is returning to the struggling chip giant - in a much bigger capacity.
He was named Intel's new chief executive on Wednesday afternoon, set to replace interim co-CEOs David Zinsner and Michelle $(MJ)$ Johnston Holthaus, who have been holding down the top post since December. When he officially assumes his role on March 18, Tan will be tasked with restoring Intel to stability - and trying to get the company back to its former glory as a chip powerhouse.
Investors seem to like the move so far. Intel's stock $(INTC)$ surged more than 10% in the extended session Wednesday following the announcement.
Within a few minutes of the news, Intel shared an internal email that Tan wrote to employees after his appointment. Keeping Intel's core strength as an engineering company is a big part of Tan's vision, but the bigger question investors are asking is whether he wants to split Intel into two parts or keep it as one, with a separate manufacturing subsidiary.
"Under my leadership, Intel will be an engineering-focused company," he said. He did not give any clues his plans for the manufacturing business. "We will work hard to restore Intel's position as a world-class products company, establish ourselves as a world-class foundry," Tan said.
Tan takes over during a tumultuous time for Intel, which has struggled to keep pace with its semiconductor technology while it plows ahead with a costly bid to revive its foundry business. The company reportedly has been in talks with various suitors or partners who could get involved in various areas of its business.
Interestingly, Tan left Intel's board in August, amid reports that he did not agree with former CEO Pat Gelsinger's plan to keep Intel together as one company, with the manufacturing business as a separate subsidiary but still part of the chip giant.
"The split will come back into the headlines... because he was associated with having a strong appetite for the split, at least that was the belief," said Daniel Newman, CEO of the Futurum Group, told MarketWatch on Wednesday. "But he never publicly disagreed with the idea of one Intel at the time."
Tan previously led Cadence Design Systems $(CDNS)$, which makes software that helps customers design chips, for a decade-plus stretch that ended in 2021. There, he oversaw "a reinvention of the company and drove a cultural transformation centered on customer-centric innovation," according to Intel's release. Cadence's stock rose more than 3,200% during his stint as CEO. He also is a founding managing partner of Walden Catalyst Ventures, a venture capital firm.
Intel's stock, meanwhile, has faced declines recently, falling about 50% in the past year. While the stock has seen some positive momentum year to date, much of that has been related to hopes for a takeover or other outside assistance, such as a joint venture involving Taiwan Semiconductor Manufacturing Co. $(TSM)$ that could operate Intel's factories. Reuters reported on that prospect earlier Wednesday.
But it remains to be seen whether such an arrangement will come to be, partly since Intel and TSMC use different technologies. All the while, the manufacturing business continues to rack up losses for Intel, and the company isn't yet a meaningful player in AI semiconductors.
"The TSMC thing doesn't make a lot of sense to me," said Stacy Rasgon, a Bernstein Research analyst. "I just did a dinner with the head of Intel's foundry business and we were like 'What would be involved?' and it sounded like a non-starter to me. What he did say was that TSMC would bring a more customer-service mindset."
Newman agreed that it was possible that Tan may keep the company together. "I do think there is a stronger case... to keep it as one Intel," he added. "But Lip-Bu Tan would have to create a strong separation between church and state," he said, referring to potential customer fears that Intel's products business could gain access to rival's product designs being manufactured by its foundry subsidiary.
Tan could also embark on more cost-cutting measures at the chip giant, a la Hock Tan, the CEO of Broadcom $(AVGO)$.
"He is going to be more of an efficiency driver, more focused, and you will see some headcount reduction," Newman predicted, adding that he expects a more lean and mean Intel. "Some of the same things Pat did, but Lip-Bu will be more aggressive on driving the roadmap and making sure that opex [operating expenses] is managed."
-Emily Bary -Therese Poletti
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March 12, 2025 20:16 ET (00:16 GMT)
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