What to make of Pat Gelsinger’s abrupt exit

Intel’s IDM 2.0 strategy involves a massive investment in fabrication and going into third-party fabrication business, rather than just keeping its fabs for itself. Essentially, Intel is trying to turn itself into TSMC with the chip business on the side. This requires enormous financial investment – $40 billion and counting. And it was definitely Gelsinger’s vision.

So, one of the first decisions a new CEO will have to make is whether or not to continue on this road or scale back. McGregor says that’s the best place to cut, because the product side is already pretty lean and mean, and any cuts would hamper it.

“One would think [IDM] could be scaled back,” he said. “The fab plan was aggressive and there is no way the industry could absorb all the fabrication capacity that Intel had planned. If anything gets scaled back, it would be the fab strategy.”

IDM 2.0 was a very long-term strategy – five years or more before it would see profitability. Jack Gold, president of J.Gold Associates, thinks the board of directors ran out of patience and elbowed Gelsinger out.

“This is a pretty major realignment for Intel Corporation and an indication the board of directors did not like the style or substance of his continued leadership, nor the recent revenues/losses as the turnaround is taking longer and more challenging than expected,” he said in a research note.

“I don’t think that Pat Gelsinger did a bad job of ‘kicking some butt’ to get Intel out of its complacency, which it had been in for many years before his arrival. And that was a good thing. But it’s taken far longer to get the ship sailing in the right direction and after three-plus years or so of trying, I think the BOD just wanted more success, so finally it just said we need to change direction and let him go,” he added.