The journey of Intel from industry titan to also-ran is a warning for the current masters of Big Tech.
As Intel CEO Pat Gelsinger steps aside, it's hard to overstate how huge the semiconductor maker once was. Ever heard of Moore's Law, which stated that computing power on transistors doubles every two years? That was coined by Gordon Moore, co-founder of Intel. Former CEO Andrew Grove was Time's Man of the Year in 1997 for being the person most responsible for harnessing the potential of microprocessors.
Alongside Microsoft, Intel ruled the technology universe for decades because its chip architecture went into every personal computer. It was very profitable for a very long time.
The comparison with Microsoft is instructive. When it became apparent that the future of computing might be in mobile or the cloud, rather than PCs, Microsoft was able to reinvent itself. Intel, by contrast, was complacent in allowing rival Taiwan Semiconductor Manufacturing (TSMC) to gain a lead in making advanced chips while Nvidia pressed ahead with designing new architectures that turned out to be superior for artificial intelligence applications.
To be fair, Gelsinger's departure isn't happening because he was complacent. When he took over in 2021, he made a big bet that Intel could become competitive with TSMC by manufacturing chips in the U.S. But market forces -- cheaper labor overseas and the huge upfront costs of building factories -- made it seem like he was trying to fight ocean waves with karate.
Others are taking notes. Nvidia is now the top chip company. Apple hasn't invented anything that's come close to the iPhone for a long time. And Alphabet's Google search dominance faces multiple threats, with the rise of AI being its chief concern.
The next Intel CEO would seem to have few good options for a turnaround. But Apple, which regained prominence starting with the iPod, offers another lesson from the tech world -- companies can get back up after being knocked down.
-- Brian Swint
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Will a New CEO Be Enough for Chip Maker?
The sudden departure of Intel CEO Pat Gelsinger won't immediately change the direction of the struggling chip maker, which has lost ground to rivals such as Taiwan Semiconductor Manufacturing over the past decade, beginning even before Gelsinger took control in 2021. Intel said Gelsinger retired effective Sunday.
-- The news comes as the Biden administration announced another slate of
restrictions on exports of chips and equipment to China, including new
export controls on more than 140 entities. Further hobbling China's chip
industry could boost demand for Nvidia's processor made specifically for
the Chinese market.
-- Intel has named two senior leaders, David Zinsner and Michelle Johnston
Holthaus, as interim co-CEOs while the board begins a search for a new
CEO. Zinsner is executive vice president and chief financial officer, and
Holthaus has been appointed CEO of Intel Products.
-- Frank Yeary, independent chair of the board, will become interim
executive chair during the transition. Gelsinger has focused on regaining
Intel's leadership in the industry, but that effort has been slow. Intel
won't achieve its target of $500 million in revenue from its own AI chip
this year.
-- Intel's new CEO may be faced with a choice that Gelsinger was reluctant
to make: selling off pieces of the company. Spinoff possibilities include
Intel's 88% stake in Mobileye's self-driving chip business, worth about
$13 billion. Another choice may be finding a buyer for the entire
company.
What's Next: Intel has turned to TSMC to manufacture some of its chips, for the first time going to an external vendor. Intel continues to pin its hopes on its own manufacturing lines that are due to launch in mid-2025. These launch dates tend to be more aspirational than fixed.
-- Adam Levine and Adam Clark
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Tesla's Board Dealt Another Blow as Delaware Upholds Pay Decision
Strike two for Tesla CEO Elon Musk's multibillion-dollar pay package, which had been approved by shareholders for a second time after a Delaware judge rejected it. The same Delaware judge upheld her decision, throwing a wrench into plans by Tesla's board to compensate Musk for a decade of service.
-- Delaware Chancery Court Judge Kathaleen McCormick initially rejected the
2018 pay package in January, saying Tesla's board didn't fully disclose
how much influence Musk had over it. But shareholders approved it again
this summer. The package included 300 million options and is now valued
around $100 billion.
-- Tesla's board offered the pay package to keep Musk focused on Tesla as
growth in the business slows. But Musk also owns other businesses,
including commercial space firm SpaceX, artificial intelligence firm xAI,
and social media platform X, and he's helping spearhead a government
efficiency initiative in the Trump administration.
-- Now Tesla's board will have to either appeal the decision or design an
equivalent pay package. Tesla didn't respond to Barron's request for
comment. Delaware's initial rejection is one reason that Tesla
reincorporated in Texas, but the 2018 package is still governed by
Delaware law.
-- At the same time Tesla and its Chinese rival BYD are both offering major
year-end discounts to meet their 2024 sales targets, fighting to beat the
other to become the top seller of all-electric cars in China, the world's
largest auto market. BYD could be on pace to outsell Tesla in the fourth
quarter.
What's Next: BYD sold about 388,000 all-electric cars in October and November, putting it on pace to sell about 580,000 in the fourth quarter. Tesla doesn't report monthly sales, but management expects higher 2024 sales compared with 2023, suggesting fourth-quarter volumes of about 515,000 cars.
-- Al Root and Janet H. Cho
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Super Micro Shares Surge After Review Finds No Misconduct
Server maker Super Micro is seeking a new chief financial officer, chief compliance officer, and general counsel, after a special board committee investigating its finances found no evidence of misconduct by the company's management or board. Current CFO David Weigand will stay in the role until his successor is appointed.
-- Super Micro said its Special Committee completed a thorough review and
that the conclusions its former auditor cited when quitting "were not
supported by the facts." Independent auditor BDO is reviewing Super
Micro's financials after Ernst & Young resigned in October.
-- Shares of the server maker surged 29% on the announcement. Super Micro
said it doesn't expect to revise its financial results for its most
recent fiscal year. Former vice president of finance Kenneth Cheung will
be its new chief accounting officer.
-- The committee's investigation, along with Cooley LLP attorneys and
forensic accounting firm Secretariat Advisors, included analyzing more
than nine million documents, interviewing 68 people, and holding
extensive meetings with former auditors E&Y and Deloitte & Touche.
-- Bridgewater Associates, the world's largest hedge fund by assets,
increased its holdings of Super Micro to 1.6 million shares in the third
quarter, and bought more stock in Palantir Technologies and Advanced
Micro Devices. It sold Nvidia shares, it disclosed in a filing.
What's Next: Super Micro faces a possible delisting by Nasdaq for not filing its financial reports on time and hasn't yet filed its annual report or financial results from the most recent quarter, though its deadline has been extended.
-- Brian Swint, Rupert Steiner, and Janet H. Cho
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OPEC Set to Meet on Production Levels as Influence Wanes
Oil producing nations plan to meet on Thursday to figure out their production plans for 2025. The group, including the Organization of the Petroleum Exporting Countries and its allies, has been holding nearly six million barrels of oil off the market since 2022 and is expected to do so until at least January.
-- The group, known as OPEC+, initially said it would start adding back
about 180,000 barrels a month to the market starting in October. But it
has delayed that plan twice, and the added production is now expected to
start in January. The U.S., Canada, and Brazil have added production.
-- OPEC+ has intervened when prices fall below $70 a barrel. But as the
group loses market share, those moves have less of an impact. Even with
OPEC+ holding so much oil off the market, most analysts expect prices to
fall next year because of an oversupply from non-OPEC oil producers.
-- Pushing back plans to resume higher oil daily oil production makes sense
given the vast uncertainty about how President-elect Donald Trump's
policies will affect the oil market and ongoing geopolitical turmoil in
the Middle East.
-- A trade war with China could cause oil prices to fall because of an
economic slowdown, and OPEC+ might have to restrict output more. If Trump
raises sanctions on Iran and Venezuela, supply could fall and oil prices
could rise. In that case, OPEC+ would probably want to increase
production.
What's Next: The biggest splash that OPEC+ could make now would be to stick to its guns and add production back to the market starting in January. That way, the cartel could take market share back from outside producers.
-- Avi Salzman
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Palantir, MicroStrategy Could Join the Nasdaq 100
(MORE TO FOLLOW) Dow Jones Newswires
December 03, 2024 07:04 ET (12:04 GMT)
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