Intel Replaces CEO with Former CTO; Shares Undervalued
New CEO Pat Gelsinger has a rich technology background, having served as CEO of VMware since 2012.
On Jan. 13, Intel (INTC) announced that Pat Gelsinger will replace Bob Swan as CEO effective Feb. 15. Gelsinger has a rich technology background, having served as CEO of VMware since 2012 and spending the first 30 years of his career at Intel. At Intel, Gelsinger was the firm’s first chief technology officer and also led 14 different microprocessor programs, including key roles in the Xeon (server) and Core (PC) product families. At VMware, Gelsinger was instrumental in transitioning the firm from a pioneer in data center virtualization into a critical component of cloud infrastructure.
When Swan took over as CEO nearly two years ago, we were skeptical of his finance-oriented background; he appeared out of place relative to peers like Nvidia CEO Jensen Huang and AMD CEO Lisa Su, both engineers. As Intel confronts competitive pressures and manufacturing challenges, we think Gelsinger’s technical and engineering expertise will serve the firm well in navigating these uncertainties. Nevertheless, the hire does not immediately rectify Intel’s process technology delays, and we still anticipate an update to Intel’s outsourcing plans during its Jan. 21 earnings call. The shares of wide-moat Intel were up about 8% following the news release and are trading at a more modest discount to our unchanged $65 fair value estimate.
Intel expects fourth-quarter revenue and GAAP earnings to be above its Oct. 22 guidance of $17.4 billion and $1.02 per share, respectively. The firm also noted that it has made strong process on its 7-nanometer process technology. Although we believe Intel will outsource some of its chip production to the likes of TSMC, we don’t think it will completely jettison its manufacturing network. Intel now has three fabrication facilities producing 10 nm chips, and we think it is more likely that its 7 nm fab footprint will be smaller (only on one fab, at least initially).
|Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.|
Abhinav Davuluri does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.