When a manager loses the trust of Wall Street, you can feel it. It hangs over the stock like a depression.
This is especially true when it’s a company considered vital to the national recovery. Like Intel (INTC).
The knives are now out for CEO Pat Gelsinger, and a break-up of the company may be just months away.
I believed in Gelsinger when he became CEO in 2021. He knew the company, having made his name there before being pushed out and taking VMware in 2011. Gelsinger was a production guy, which is what the company needed. I believed he would get adequate support from the Biden Administration, which made him the centerpiece of its “Build Back Better” program.
But it hasn’t worked out. Intel’s designs have proven sub-standard in a client market that now has alternatives. The foundry plan looks like a failure.
Gelsinger has got to go. He didn’t start the fire, but someone has to walk the plank.
What Happens Next?
Intel is now worth under $100 billion. Long-time rival Advanced Micro Devices (AMD) is worth almost 2.5 times that.
But AMD would be foolish to buy Intel. Intel has nothing AMD wants or needs.
What Intel needs is someone who can deliver on Gelsinger’s promises.
That starts with a break-up, directed by private equity. I first suggested this 8 years ago. Spin-off Mobileye (MBLY) completely to bring in cash, sell the design shop to Qualcomm (QCOM), and bring in someone from Taiwan Semiconductor (TSM) to run the foundry.
The last would require permission, a delicate negotiation between nations, and if Trump is the President, we’re all sunk anyway. Let’s assume, then, it’s someone from the Harris Administration who does it. In that case it can be done.
The deal would include a partial purchase of the foundry by TSM. Given the Taiwanese company’s market cap of $850 billion, that’s easily done. The resulting technology transfer would assure Intel’s survival. It would be a good investment for Taiwan Semi.
As I have written for decades now, Moore’s Law is great, but Moore’s Second Law is a bitch. It holds that costs increase right along with complexity. Ultimately those costs squeeze out competition. Production at the leading edge becomes the work of nations. That needs to be acknowledged.
There will still be American chip companies. Micron (MU) and Texas Instruments (TXN) still run their own foundries. Global Foundries still exists, albeit in Saudi hands. The only other player is Samsung (SSNLF), and they’re teetering.
Chip designs must be made, or they remain software. For national security reasons, they must be made here. The present Intel management can’t get the job done. We need to get someone there who can, stat.
