Intel CEO Pat Gelsinger’s sudden ouster has raised questions about the company’s strategy. Using the Five Whys analysis, we can break down the reasons behind Gelsinger’s departure.
The board of directors offered him a choice between resigning or being fired, citing concerns that his plan to turn Intel around was not working fast enough. The $100 billion investment in building chip fabs and winning government contracts for secure chips reduced the company’s free cash flow and increased debt.
However, this strategy also led to declining revenue from chip manufacturing contracts with Microsoft and Amazon, a 33% drop in Intel’s revenue, and a 66% plunge in the company’s stock price under his tenure. The company’s Q3 2024 loss was $16.6 billion.
Intel’s dependence on selling chips for PCs, which declined rapidly following the pandemic, was another factor contributing to Gelsinger’s downfall. The company was once the leading chip manufacturer, but its failure to adapt and innovate led to its decline.
The ouster of Pat Gelsinger marks a new era for Intel, one that requires refreshing leadership and adapting to changing market dynamics. Two key lessons emerge from this incident: Don’t make capital-intensive bets on a strategy unless you have technology that can put your company ahead, and bet on new growth curves before your core business begins to decline.
Peter Cohan is the founder of Peter S. Cohan & Associates, a venture capital firm that invests in early-stage companies.
Source: https://www.inc.com/peter-cohan/analysis-why-did-intel-oust-ceo-pat-gelsinger/91034979