The announcement of Intel CEO Brian Krzanich’s abrupt resignation came as a shock not only to Intel's workforce but, perhaps even more so, to the tech community and financial markets.

Brian Krzanich
Brian Krzanich

Intel announced that its chief executive resigned over a past consensual relationship with an Intel employee. The company said Krzanich had “violated a non-fraternization policy” that applies to managers.

Unlike a slew of young startups and VCs whose “men-behaving-badly” culture was exposed, fueling the “MeToo” movement in Silicon Valley, Intel is a mature company whose cautious HR and diversity policies are often considered the industry’s gold standard. Therefore, it surprised no one when the semiconductor giant made no excuses for Krzanich, nor did Intel ask him to reconsider his resignation. 

Specific circumstances surrounding the CEO’s relationship with his underling remain sketchy, although some say that the affair ended a few years ago. Another Intel employee recently made the company aware of it. An outside agency hired by Intel to respond to media questions did not respond to EE Times' inquiries by press time.

Intel’s business affairs appear largely unaffected by this surprise. Some semiconductor industry observers suspect that Krzanich’s departure couldn’t have come at a more convenient time.

Approving the Krzanich departure was likely an “easy decision” for the Intel board of directors, said Jim McGregor, the founder of Tirias Research. He believes the resignation clears the way for its board to steer the semiconductor giant into new directions.

“This pre-empts everything,” McGregor said. At a moment when Intel’s two core competencies — “manufacturing and Intel Architecture” — are both beginning to lose their grip on the market, McGregor believes that changes in top management would have — sooner rather than later — become paramount on the board’s agenda.

So, was Krzanich perhaps forced out? There is no evidence of any such intent, but Krzanich’s relationship with the unnamed employee created the opening for a change.

The board named Chief Financial Officer Robert Swan as interim CEO, effective immediately. Swan joined Intel in 2016 from his post as CFO of eBay. Intel said it has started a search for a permanent leader, considering internal and external candidates.

“Intel’s board has two choices,” McGregor observed. The easy route would be to promote an established Intel executive. Alternatively, with an eye toward corporate overhaul, the board might prefer fresh blood from outside.

Intel chairman Andy Bryant said in a statement: “We appreciate Brian’s many contributions to Intel.”

Intel's stock price dropped about 2 percent on news of Krzanich's resignation. But Wall Street analysts largely downplayed the event, seizing instead on another Intel announcement Thursday that Intel was raising its second quarter revenue and profit forecast to levels above Wall Street's expectations.

Intel said it now expects second quarter sales of about $16.9 billion, up from its previous estimate of $16.3 billion. The company expects earnings per share of about 99 cents, up from an earlier target of 85 cents.

"While a surprise CEO transition clearly adds uncertainty and risk, we believe Intel's strong fundamental performance (particularly within its data-centric strategy) should provide more than offsetting comfort for investors," said Ross Seymore, a research analyst at Deutsche Bank, in a research note.

Turning to the topic of Intel's next hire, Seymore noted that each of Intel's previous CEOs has been hired from within. The most senior members of Intel's management team, including Swan, are executive vice presidents, Seymore noted. They include Murthy Renduchintala, group president of Technology, Systems Architecture & Client Group and chief engineering officer, Navin Shenoy, executive vice president and general manager of the Data Center Group, Leslie Culberton, executive vice president and general manager of product assurance and security, and Steven Rodgers, executive vice president and general counsel.

According to an Oregonian report, Intel said it hasn't made any severance payments to Krzanich. The company told the newspaper: “The investigation is ongoing and the board reserves the right to act in the best interest of shareholders.” Intel maintains that the relationship was consensual but declined to explain the substance of its investigation.

 — Junko Yoshida, Chief International Correspondent,  EE Times