Intel Names Swan CEO as Chipmaker Faces Challenging Market

Ian King (Bloomberg) -- Intel Corp. named Robert Swan as its seventh chief executive officer, filling the most prominent role in the semiconductor industry at a time when opponents are challenging the company’s 30 years of market dominance.

Swan, 58, has been interim CEO for seven months and chief financial officer since 2016. He had said on multiple occasions that he wouldn’t take the job. Todd Underwood, vice president of finance and director of Intel’s corporate planning and reporting, will become interim chief financial officer during a search for a permanent replacement, Intel said Thursday. The shares fell as much as 3 percent in U.S. trading.

Swan takes the helm at a crucial time in Intel’s history. The chipmaker reported record sales and profit for 2018, but fell short of analysts’ projections for the fourth quarter and gave a disappointing forecast for 2019. Intel’s processors are the heart of more than 90 percent of the world’s laptops and almost all server computers, yet delays in introducing new chip-manufacturing technology have led some analysts to warn that the company is more vulnerable to competition than it has been for decades.

“Our execution must improve. And it will. Our customers are counting on us,” Swan said in a letter to employees published on Intel’s website. “We have a powerful culture, and to achieve our ambitions we must evolve.”

Related:Ampere Fires Opening Salvo in Battle With Intel for the Data Center

The appointment fills a vacuum caused by the ouster of Swan’s predecessor, Brian Krzanich, who left after the board was informed he had an affair with an employee. Under Krzanich, many of the senior executives who had risen through the ranks and were natural successors -- Renee James, Kirk Skaugen, Stacy Smith and Diane Bryant -- departed amid an unprecedented influx of senior executives from outside.

Naming Swan breaks Intel’s long-established leadership grooming process. All of Swan’s predecessors either founded the company or spent their entire career there. The chipmaker has a program of identifying promising young managers and apprenticing them to senior executives to give them experience and test them.

Swan has spent almost his entire career in the role of CFO. His one foray into the role of chief operating officer was during the dot-com bubble at Webvan Group, a grocery home delivery company that failed in 2001.

Before he joined Intel, Swan’s career in technology was confined to a three-year stint as CFO of Electronic Data Systems Corp. He was finance chief of EBay Inc. for nine years.

What Bloomberg Intelligence Says

Intel’s only other non-technically trained leader was the late Paul Otellini, who led the company for eight years up until 2013. All of Intel’s other leaders from its foundation in 1968 have been scientists. The company’s success has been built on its mastery of the design and manufacturing of semiconductors, creating computer chips that it argues are the most complicated devices created by humans.

In the final years under Krzanich, who honed his career in the company’s factory network, Intel admitted it was having problems introducing new manufacturing technology. For the first time in decades, Intel is now faced with the possibility that rivals will have chips in the market built with techniques that are more advanced than its own.

Some investors had hoped the company would find an external candidate, “believing this would increase the possibility of some more active/aggressive transformational moves within the company,” according to Wells Fargo analyst Aaron Rakers.

Leadership in manufacturing has been a crucial part of Intel’s success. Shrinking the dimensions of the microscopic transistors that give chips their function enables designers to create products that can be cheaper, can process or store more data or work more efficiently. Intel has pushed back the arrival of its 10-nanometer production chips on the market toward the end of 2019, after earlier saying they would arrive in the second half of last year. That’s led analysts and investors to speculate that the company’s dominance of computer processors is under threat.

Intel’s data center business, which provides chips for cloud computer providers such as Amazon.com Inc.’s AWS and Alphabet Inc.’s Google, had driven an expansion of sales and revenue in recent years. But on Jan. 24, Intel reported a dramatic slowdown in that unit’s sales. The company’s first-quarter and 2019 forecasts also fell short of estimates. Intel cited sluggish spending at large cloud computing providers, softness in China and the impact of geopolitial concerns.

Swan’s base salary will be $1.25 million, according to a filing.