Intel has been without a CEO for more than three months, but this week it appointed industry veteran Lip-Bu Tan, who served on the board for two years until August last year. Investors were encouraged by the move, with the stock ending the first trading session after the appointment up 14.6%.
Image Source: Intel
For a company that has lost about 60% of its market cap in five years, dropping below $100 billion, a one-day gain of nearly 15% can be considered a success. Investors are also encouraged by the fact that Intel’s new leader has a background that includes his tenure as head of Cadence Design Systems for more than a decade. The leading developer of chip design software has predictably given Lip-Bu Tan extensive connections in the semiconductor industry, so this experience should make it easier for Intel’s new leader to find new customers for the contract business.
In addition, since Lip-Bu Tan managed to work for a couple of years on the Intel board of directors, he is well acquainted with the specifics of the company’s business and the current problems it faces. Bernstein analysts admitted that Lip-Bu Tan was their favorite at the stage of choosing Intel’s CEO. Since the beginning of this year, the company’s shares have increased in price by 3%, but last year they managed to lose two-thirds of their value.
By August, Intel’s stock had fallen to its lowest in a decade, and shortly after the company’s disappointing quarterly results, it announced a business restructuring, but its implementation by December displeased the board, leading to the early retirement of then-CEO Patrick Gelsinger in early December. Bernstein analysts attributed the latter to excessive optimism, so Lip-Bu Tan is expected to take a more realistic approach to solving the company’s problems. Investors are also hoping that Intel’s new leader will be able to close the gap with Nvidia and AMD in the development of computing accelerators for artificial intelligence systems.