Two days ago, the industry was taken aback by Pat Gelsinger’s surprise resignation – suddenly deciding to step down as the CEO of Intel and likewise exiting the board of directors. With two co-CEOs working as ad-hoc replacements, Team Blue’s executive structure is in dire straits as it looks for a suitable successor to Gelsinger. Through publicly available 8-K Forms and a guesstimate from Reuters, Patrick Gelsinger has reportedly left Intel with a severance package worth $12 million – further exacerbated by his large stake in Intel.
Traditionally, CEOs announce their resignations months before the fact and nominate a suitable successor. In light of rumors – so much so that you can practically smell them in the air – there is speculation that Pat was likely shown the door at a request by displeased board members. Gelsinger spearheaded a struggling Intel under his IBM 2.0 strategy as Chipzilla is now nearing its 5N4Y (five nodes in four years) promise with 18A around the corner. Intel refused to provide further clarification, but this corporate debacle casts doubt over its great ambitions in Intel Foundry, DCAI (Data Center and Artificial Intelligence), and AXG (Accelerated Computing Systems and Graphics) segments – to name a few.
Per the filing, payday is knocking on the door early for Gelsinger as he is set to enjoy a lavish golden handshake. The package includes a severance pay equal to 18 months of service as CEO totaling $1.875 million ($1.25 million for 12 months) backed by 1.5x of Gelsinger’s current target bonus – which itself is 275% of his base salary – netting us $5.15 million – payable throughout 18-months. Lastly, pro-rata payments equivalent to 11 months (out of 12) of the annual bonus should total almost $12 million per Reuters.
The industry is naming Lip-Bu Tan as a suitable successor, though it could take a while before candidates are shortlisted and selected for onboarding. Intel’s repeated financial failures might have potentially created a rift between Gelsinger and shareholders. Earnings have been poor because bleeding-edge foundries aren’t cheap to run and finance—especially when external consumer demand is almost non-existent to compensate for these high costs.
Still, the aftermath of this decision will materialize in the coming weeks or months. The CHIPS Act, in a way, restricts Intel from spinning off its foundry division since it must own at least 50.1% of Intel Foundry. Hence, it remains to be seen which division will be the first on the chopping block—or maybe none at all—who knows?