Five challenges facing Intel's new CEO
Interim CFO Bob Swan was handed the reins permanently yesterday
Intel finally appointed a new chief executive yesterday, drawing to a close a seven-month CEO hunt triggered when Brian Krzanich departed.
Bob Swan (pictured) took the reins on an interim basis when Krzanich departed, after his extramarital affair with a subordinate came to light.
Intel may have reported a record year just last week, hitting revenue of £54bn, but the CEO role does not come without its challenges.
Here we outline five tasks that will likely be near the top of Swan's to-do list.
Proving Intel wanted him
The first challenge: reassuring the world that Intel is 100 per cent behind his appointment.
A seven-month job search perhaps suggests that Intel was after qualities not already inside its organisation, or at least wasn't convinced by internal candidates.
Last September Bloomberg reported that Intel had taken its hunt outside the organisation, with varying levels of interest.
High-profile tech executives including former Intel datacentre boss Diane Bryant, former president Renee James, AMD CEO Lisa Su, and Apple hardware boss Johny Srouji were all linked with the role, and analysts have suggested that Swan may not have been the firm's first choice.
In fact, CNBC claimed that Intel had been "far down the road" with another candidate, only for the deal to fall through.
It would seem that the investors are not convinced, with Intel's share price falling nearly three per cent (equating to around $5bn) after Swan's appointment was announced.
Some analysts have suggested that Intel has gone with the "safe bet", but questioned why Intel has gone with an outsider for the big job.
Intel's previous six bosses all had lengthy careers with the vendor, while Swan joined as CFO in 2016.
Proving he wanted Intel
The second challenge: proving that he wanted the job.
As his previous job title made clear, Swan was only supposed to be CEO on an interim basis.
While it's unlikely that he would have disclosed if he had applied for the job, the fact he took so long to be made permanent suggests it wasn't a straightforward appointment.
Just three weeks ago (over six months into the recruitment process), he told CNBC he wasn't interested in the position. "No, I do not [want the job]," he said. "I love my day job as the CFO."
And just a week ago, when asked about the potential candidates, Swan said he was sure that "Intel would rally behind him or her".
Swan seemed to suggest that he had been offered the role recently, telling employees in a letter: "When the board approached me about taking the CEO role, I jumped at the opportunity to remove 'interim' from my title."
Shifting Intel away from PCs
It has been Intel's strategy for some time to reduce its dependency on the PC market, and recent results show it is working.
It's no mean feat to pivot a business of Intel's size, as IBM is finding, but recent results show that Intel's transition is well under way.
In its last financial year the vendor's PC-focused business made up $37bn of its overall $70.8bn revenue.
The vendor's datacentre revenue was $23bn, and rose 21 per cent. Three smaller units - focusing on IoT, memory and programmable solutions - all saw growth and contributed sales of between $2bn and $5bn each.
In short, Intel's new area of focus makes up just under half its revenue, at $30.8bn. This is a radical shift from five years ago, when the datacentre business generated just $11.2bn in sales.
It is also worth pointing out that Intel's PC-focused business is still growing, with an increase of nine per cent last year.
Last week Swan said that Intel expects the PC market to be flat next year, with the market in the middle of its refresh cycle.
Ending the chip shortage
Ironically, Intel is actually struggling to keep up with demand for PCs, with a resurgence in the market catching the vendor off guard.
Numerous vendors, most recently Microsoft, have blamed shrinking PC revenues on constraints in chip supply.
Microsoft said the components shortage was responsible for a drop in its Windows OEM revenue, with PC builders and partners unable to get their hands on CPUs.
When publishing the results for its full financial year earlier this month, Swan said that Intel expects the shortage to be resolved by the end of Q2.
"We feel like we constrained a fairly healthy PC ecosystem in the fourth quarter," Swan said.
Last year Intel said it would plough an additional $1bn into its manufacturing facilities in Ireland, Israel, Oregon and Arizona.
The vendor also said that it plans to have tighter relationships with distribution and channel partners to help improve the flow of CPUs.
Holding off AMD
Intel's closest (yet still miles away) competitor AMD has been the primary winner of the chip crisis.
To put things into perspective, Intel has a market cap of $215bn, while AMD is worth $24.4bn.
But AMD has had a resurgence of late, with its share price rising as much as 218 per cent since the start of 2018. Intel's struggles in keeping up with demand are largely considered a key factor in this growth.
Earlier this week AMD reported annual revenue growth of 23 per cent year on year, up to $6.48bn. It also claimed to have more than doubled shipments of its EPYC.
The Santa Clara-based vendor also recently entered a partnership with PC and laptop giant HP. UK channel boss Neil Sawyer told CRN that the vendor "wanted to be a part" of AMD's growing market presence.
Last year channel partners attributed AMD's recent success to its Ryzen CPU, which launched with Acer, Asus, Dell, HP, Huawei, Lenovo and Samsung.