Intel’s fourth-quarter earnings miss
The last few days of January were volatile for Intel (INTC) stock as its fourth-quarter earnings missed analysts’ estimates even though its 2018 earnings reached a record high. The company reported weak first-quarter earnings guidance owing to low modem sales from Apple and slowing demand for PC and data center processors.
Intel has been facing supply shortages of PC and server processors, and its management expects these shortages to continue until the first half of 2019. At the same time, its management expects PC and server demand to slow owing to the weak macroeconomic environment created by US-China trade tensions. Such weak earnings and outlook sent Intel stock down 5% on January 25, a day after its earnings release.
Intel’s new CEO
Another blow came a week later, when Intel named its CFO and interim CEO, Bob Swan, as its permanent CEO. The announcement sent Intel stock down 2.6% in the first half of the January 31 trading session, while rivals Advanced Micro Devices (AMD) and NVIDIA (NVDA) saw their stocks rise 5.7% and 4.6%, respectively. This instant reaction came because investors had been expecting Intel to appoint a CEO with expertise in technology or manufacturing, whereas Swan’s expertise is in finance. In comparison, AMD’s and NVIDIA’s CEOs have strong technical expertise.
Swan’s appointment disrupts Intel’s long history of CEOs who come from engineering backgrounds and have risen up in the ranks after long stints in the company.
Swan joined Intel in September 2016 and lacks technical and engineering experience. He served as the CFO of eBay for nine years and also worked at venture capital company General Atlantic. The only CEO experience he has is with a grocery delivery startup called Webvan, which crashed when the dot-com bubble burst. Intel’s board chair, Andy Bryant, stated in an announcement that the board had selected Swan because of his performance as interim CEO in the last seven months.
In this series, we’ll look at Swan’s achievements as Intel’s interim CEO and the challenges that lie ahead for the company.