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Why Did Intel Stock Fall on Swan’s Appointment as the Next CEO?

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Why is Bob Swan’s appointment surprising?

Previously, we saw that Intel (INTC) stock fell on its fourth-quarter earnings miss and the announcement of Bob Swan as its new CEO.

In the announcement, Swan stated that he “jumped at the chance” when he was offered the permanent CEO position, which counters Bloomberg reports that stated he wasn’t interested.

Even analysts thought Swan was unlikely to be named as the new CEO given his short tenure at Intel and his lack of experience in technology and manufacturing. Most analysts were of the view that Intel needed a CEO with the technical and operational expertise to bring Intel’s long-due 10 nm (nanometer) node into production and expedite its product road map to catch up with competitors such as Advanced Micro Devices (AMD), which has already launched 7 nm products.

Hence, Intel stock fell 2.6% in the first half of the January 31 trading session. However, its stock recovered in the second half and the next day’s trading session as Swan talked about his plans for Intel.

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Bob Swan’s letter to Intel’s employees

In a letter to employees, Swan wrote that Intel would continue to transition from a PC-centric company to a data-centric company and that it would continue to develop advanced PC and server chips and expand to fast-growing markets such as AV and AI.

He also wrote that his focus is on improving execution. Execution is a major roadblock Intel’s new CEO has to address, as the company lost its technology advantage to AMD due to a four-year delay in the launch of its 10 nm products. The CEOs of rival companies AMD and NVIDIA (NVDA) boosted their companies’ growth through strong product execution.

Analysts’ views on Intel’s new CEO

According to VentureBeat, Enderle Group principal analyst Rob Enderle stated that Intel’s new CEO would focus more on cost cutting and less on innovation. Bernstein analyst Stacy Rasgon, as reported by Reuters, discussed whether Swan would keep the low-margin modem and memory businesses or divest them.

Analysts’ comments came as Swan, during his tenure as CFO and interim CEO, implemented cost controls, spun off Intel’s Security business, acquired Mobileye, and divested WindRiver’s embedded software and wearables units.

Next, we’ll take a look at Swan’s plan for Intel.

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