![]() We estimate that Intel‘s (NASDAQ:INTC) EBITDA will likely grow in low-mid single digits in 2018, primarily led by its Data Center Group, which has seen solid growth of late, led by its cloud business, as well as high performance products, such as Xeon Scalable. We have created an interactive dashboard analysis on Intel’s sensitivity to changes in its EBITDA margin. Note that you can adjust the margin drivers, and see the impact on Intel’s overall valuation and price estimate. Below are some of the charts and data from the interactive dashboard. Expect Data Center Group To Drive Future EBITDA Growth We forecast Intel’s EBITDA margin separately for its Client Computing Group, Data Center Group, Internet of Things, and All Other segments. Client Computing Group EBITDA margin declined from over 42% in 2012 to 35% in 2016, due to increasing competition, macro headwinds, and negative margins from the Mobile and Communication division. Also, Intel was heavily subsidizing manufacturers’ costs to include its components in their future tablets, a move that significantly impacted its bottom line. However, the company managed to grow its margins to 44% in 2017, due to an increase in average selling prices, and an improved product mix. We expect the segment margins to stabilize around 42% in the long run. The segment's revenues have also improved in recent years due to better pricing. In fact, the segment revenues were up 3% in Q1, despite a continued decline in the PC TAM (total available market). We expect the segment to continue to grow in the low single digits throughout our forecast period. With stable margins of around 42%, the segment EBITDA will likely grow in low single digits. Looking at the Data Center Group, the segment margins have declined from over 62% in 2014 to 46% in 2016, due to higher expenses. However, the margins improved slightly to 50% in 2017, led by new improved process technology and higher average selling prices. We expect the margins to remain around current levels of 50% in the coming years, and any significant increase is unlikely. The segment revenues are expected to trend higher in the coming years. The cloud computing market is expected to grow from $220 billion in 2016 to over $411 billion by 2020, according to Gartner. Intel, in particular, will benefit from server virtualization. The company reported a 24% segment revenue growth and over 70% jump in operating income in Q1 2018. As such, we forecast the segment EBITDA to grow at around 7% over the next couple of years. Other Segments Among other segments, Internet of Things EBITDA margin has declined from the highs of over 41% in 2013 to a little over 26% in 2017. The large range of devices in this category pitches Intel against a lot of competing chip makers such as Qualcomm, Broadcom, Nvidia, Texas Instruments, ST Microelectronics etc. Intense competition in the market has an impact the company’s pricing power. However, we expect the company to maintain the current margins of 26%. It should be noted that the average annual segment revenues have grown in the low teens over the past five years, and we expect the growth to accelerate in the coming years. As such, higher volumes will help reduce fixed costs and hence help Intel sustain the current margins. What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs Read More How Sensitive Is Intel To EBITDA Margin Changes? : https://ift.tt/2K9dsgN
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Intel faces a thin bench of potential internal candidates to replace Brian Krzanich, who resigned as CEO Wednesday for violating company policy regarding personal relationships between co-workers. Photo: mike blake/Reuters
By
Jay Greene and
Tripp Mickle
4 COMMENTS
Intel Corp. INTC 0.72% Chief Executive Brian Krzanich’s abrupt resignation this week creates a quandary for the chip maker’s board: Pick a successor from a thin bench of internal candidates, or turn the storied $243 billion company over to an outsider for the first time in its 50-year history. Mr. Krzanich, who resigned Wednesday for violating company policy by having a relationship with a co-worker, had no clear successor. It has been years since the company has had a president or operating chief, stepping stones for some previous Intel CEOs. Chief Financial Officer Robert Swan, who was named interim CEO on Thursday, told employees in a companywide videoconference that he wasn’t interested in staying on as the permanent CEO, according to one employee who watched the webcast. Still, hiring an outsider would be difficult, people familiar with the company say. Intel is a semiconductor-industry leader with integrated design, manufacturing and marketing operations, and its culture is rooted in a belief it is superior to rivals because of its place in tech history. “It’s very hard to find someone given the incredibly high degree of technical complexity you have to deal with,” one of these people said. “It’s some of the most challenging rocket science in the world, and finding a CEO who can manage that is difficult.” Intel didn’t have an immediate comment on its CEO search. The last time the CEO job was open was when Paul Otelleni, Mr. Krzanich’s predecessor, surprised the board in November 2012 by announcing he would step down. Intel spent about six months searching for a new chief, weighing about five internal and five external candidates, according to one of the people, who was familiar with the search. Mr. Krzanich, then Intel’s chief operating officer, was a candidate.
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Stay the CourseIntel Corp.'s search for Brian Krzanich's successor as CEO comes amid a multiyear return in the company's share price toward late-1990s levels.
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![]() Intel’s share price and CEO tenure $70 60 50 40 30 20 Robert Noyce Craig Barrett Gordon Moore Andy Grove Brian Krzanich 10 Paul Otelli 1975-’87 1987-’98 2005-’13 2013-’18 1968-’75 1998-’05 0 2013 1987 1998 2005 1975
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![]() Intel’s share price and CEO tenure $70 60 50 40 30 20 Robert Noyce Craig Barrett Gordon Moore Andy Grove Brian Krzanich 10 Paul Otelli 1975-’87 1987-’98 2013-’18 2005-’13 1968-’75 1998-’05 0 1975 1987 2005 1998 2013
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![]() Intel’s share price and CEO tenure $70 60 50 40 30 20 Robert Noyce Craig Barrett Gordon Moore Andy Grove Brian Krzanich 10 Paul Otelli 1975-’87 1987-’98 2013-’18 2005-’13 1968-’75 1998-’05 0 1998 2013 1987 2005 1975
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![]() $70 Intel’s share price and CEO tenure 60 Robert Noyce Gordon Moore Andy Grove Craig Barrett Paul Otelli Brian Krzanich 1 1968-’75 1975-’87 1987-’98 1998-’05 2005-’13 2013-’18 50 2 3 40 4 30 5 20 6 10 1 2 3 4 5 6 0 ’87 ’05 1975 ’13 ’98 Sources: the company (tenure); FactSet (shares) The executive recruiting firm Spencer Stuart assisted with the search, the people said. A Spencer Stuart spokesman declined to comment, saying Intel remains a client. Mr. Krzanich was only the sixth Intel CEO. If the company hires an outsider, it would be a first for the company since its founding in 1968 by Robert Noyce and Gordon Moore. New Street Research analyst Pierre Ferragu thinks Mr. Swan, who joined Intel 1½ years ago from eBay Inc., could still stay on as CEO if the board asks. But if Intel goes outside, it might not have to look too far to find a familiar face, Mr. Ferragu said. Two possible outside candidates, he said, are both former Intel executives: Pat Gelsinger, CEO of VMware Inc., and Diane Bryant, operating chief of Alphabet Inc.’s Google Cloud unit. As Intel alumni, they understand the culture but can bring an outsider’s perspective, Mr. Ferragu said. Mr. Gelsinger in 2013 shot down speculation that he would be named Intel CEO, saying at the time he was “happy in my role at VMware and hope to be doing it for many years to come.” Mr. Gelsinger and Ms. Bryant declined to comment.
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In a tweet responding to the suggestion that he get consideration for the post, Mr. Gelsinger wrote, “I love being CEO @vmware and not going anywhere else. The future is software!!!” Another option is Sanjay Jha, former chief of Globalfoundries Inc., who once headed operations at Qualcomm Inc. and has been on the shortlist of executive candidates for Intel in the past, according to a person familiar with Intel’s thinking. Mr. Jha declined to comment. Intel’s CEO void comes at a critical time, as the company is eager to extend its momentum. Its share price has risen 11% this year, outpacing the Nasdaq Composite Index. Intel recently reported record first-quarter revenue and profits. But the company also is looking to regain its edge in design and manufacturing of the processors that have defined it for decades. The next CEO will have to deal with Intel’s struggles in manufacturing its next-generation processors, as well as threats from rivals crafting specialized chips for new arenas such as artificial intelligence. Given the complexity of the challenges, Intel’s board is expected to favor an internal candidate, according to the people familiar with the company. But the board had pushed Mr. Krzanich to diversify Intel’s leadership in recent years, these people said, contributing to a raft of senior departures. That has left Intel with a relatively short list of internal candidates, analysts say. One of those candidates is Dr. Venkata M. Renduchintala, Intel’s engineering chief, known as Murthy, who was recruited from Qualcomm in 2015. He oversees Intel’s development of traditional processors and coming graphics chips meant to challenge Nvidia Corp. Dr. Renduchintala also has taken responsibility for manufacturing operations and has been implementing a plan developed by Mr. Krzanich to help Intel overcome production delays with its next-generation chips, according to one of the people familiar with Intel’s leadership. The other internal candidate, Navin Shenoy, oversees Intel’s high-margin data-center business and before that ran its PC business, which are Intel’s most dominant areas. Both showed improved performance under his leadership, the people familiar with the company said. The risk in choosing Mr. Shenoy would be that Dr. Renduchintala, seeing his path to CEO cut off, might head for the door, leaving Intel without his technical know-how, one of these people said. Mr. Shenoy, who is younger, could stay on and look to ascend down the road, the person said. Neither Mr. Shenoy nor Dr. Renduchintala replied to requests for comment. —Ted Greenwald contributed to this article. Write to Jay Greene at [email protected] and Tripp Mickle at [email protected] [unable to retrieve full-text content]
Since Brian Krzanich was named CEO in May 2013, Intel’s share price has risen 123%, outpacing the S&P 500 but underperforming the PHLX Semiconductor Sector Index. Photo: David Becker/Getty Images
By
Tripp Mickle
The sudden exit of Intel Corp. INTC -2.38% Chief Executive Brian Krzanich for violating company policy is the latest in a string of high-level departures at the chip giant. Diane Bryant, former head of Intel’s data-center group, joined Google’s cloud business late last year, while Kirk Skaugen, former head of client computing who was at one point seen as a CEO candidate, left the company in 2016 and is now with Lenovo Group . “Given so much change driven by Mr. Krzanich, his departure could make succession planning and further transition challenging,” analysts at Cowen & Co. said Thursday. The transition comes as it seeks to extend its dominance in PC chips into new frontiers in computing. Two current Intel executives—Venkata M. Renduchintala, known as Murthy, and Navin Shenoy —are believed to have the inside track among internal candidates to succeed Mr. Krzanich, according to people familiar with the company’s leadership. Dr. Renduchintala, who previously worked at Qualcomm Inc., is Intel’s engineering chief, overseeing development of traditional processors and the company’s coming graphics chips. He recently took responsibility for manufacturing operations, which have been plagued with delays in producing the company’s next-generation chips. Mr. Shenoy currently oversees Intel’s high-margin data-center business, and before that ran its PC business—Intel’s most dominant areas—which both showed improved performance under his leadership, the people said. Intel’s strength in processing chips has come under pressure as graphics processors, primarily from Nvidia Corp. , emerged as a workhorse for artificial intelligence. Intel in 2016 sought to address that market by buying Nervana Systems and Movidius, a pair of startups working on AI-focused chips. It recently launched an effort to make graphics chips to better compete with Nvidia. Intel became more acquisitive under Mr. Krzanich. He built out Intel’s business in data-center servers, supplying companies such as Amazon.com Inc. and Microsoft Corp. that are spending billions annually on cloud-computing facilities. A big chunk of that growth came from Intel’s $16.7 billion deal for Altera Corp. in 2015—the company’s biggest-ever acquisition. Mr. Krzanich followed up his Altera buy with a big bet on the booming market for automotive-vehicle technology by spending $15.3 billion for Mobileye NV, a leader in sensors for assisted-driving features. Mr. Krzanich also sought growth in others areas, beefing up Intel’s position in outfitting a variety of household and industrial equipment with computing capabilities, a burgeoning business known as the Internet of Things. Intel has made a push in the market for cellular-communications chips, replacing Qualcomm Inc. units in a portion of Apple Inc.’s iPhones, and has made inroads on 5G cellular technology. Mr. Krzanich pushed Intel into visibly high-profile areas such as augmented-reality headsets and competitive gaming known as esports. Some of these efforts fell short; the company, for instance, shut down several products designed for wearable computing, such as smartwatches. Since Mr. Krzanich was named CEO in May 2013, Intel’s share price has risen 123%, outpacing the S&P 500 but underperforming the PHLX Semiconductor Sector Index. Sales have grown nearly 18% between 2012 and 2018 to $62.76 billion. Last year, Intel held a 99% share of the most popular type of chips used in servers, and a 91% share of the processors found in PCs, according to Mercury Research. Write to Tripp Mickle at [email protected] Intel is facing a turning point in its nearly 50-year history. Intel CEO Brian Krzanich resigned yesterday, following an ongoing investigation into a past consensual relationship with an Intel employee that violated the company’s non-fraternization policy. It’s a surprise end for Krzanich, who first joined Intel more than 35 years ago, and spent most of his time at the company on the operations side. Krzanich was appointed Intel CEO five years ago, and was left with the messy task of fleshing out Intel’s mobile strategy and driving the company forward in new markets. Known for PCs and servers, Intel’s business has been disrupted by smartphones and the cloud, and was caught seemingly unaware by the rise of AI and autonomous vehicles. While you might have previously cared about what Pentium processor was inside a laptop with an Intel sticker plastered on it, these days Intel’s relevance has declined. You don’t hear “Intel Inside” anymore or the jingle during commercials, and billions of smartphones don’t rely on Intel processors. Krzanich spent the past five years fighting this decline all while trying to position Intel for the future. There have been promises of smart buds, Intel-powered smartwatches, smartglasses, an Intel TV service, drones with Intel chips, and self-driving cars, but around 85 percent of Intel’s revenue still comes from its server and PC work. Intel has tried to reposition itself multiple times at CES in recent years with flashy keynotes, but the efforts have been unconvincing and lacked focus. As Intel’s focus has strayed into other markets, its core business came under attack. While Intel has enjoyed a decade of dominance in PCs and servers, competitors are on the march. Intel typically leads by shrinking its chips faster than competitors and being the first out the door with faster and more capable processors. Under Krzanich’s watch, Intel has struggled to produce 10-nanometer chips, and competitors like AMD have caught up with its Zen architecture for Ryzen and EPYC processors. AMD now competes in both performance and value, and Krzanich recently admitted Intel will even lose server share to AMD this year. Intel was originally planning to release its 10-nanometer processors back in late 2016, but the company recently delayed that once again to 2019 due to yield issues. It’s the first major stutter in Intel co-founder Gordon Moore’s incredibly accurate Moore’s Law prediction of roughly doubling the number of transistors in its processors every couple of years. Intel is also redesigning its processors to protect against the Spectre security flaws that were uncovered earlier this year. Once Intel gets production back on track, it faces competition that it can’t pay off PC makers to stem. ![]() During Krzanich’s short time as CEO, Intel underwent major restructuring and bailed on the smartphone market. The company canceled its Atom processors that were supposed to compete with Qualcomm’s Snapdragon line, and even signed a deal to produce ARM-based chips in Intel factories. Intel is now focusing on the GPU business, and the future of artificial intelligence. Intel has hired Apple and AMD veteran Raja Koduri to build graphics chips that it plans to introduce in 2020. This will be an important push for Intel, as it needs to focus on GPU work for high performance computing, visualization, and AI computing in order to chase the competition. AMD has an entire line of GPUs dedicated to machine learning, and Nvidia continues to demonstrate the type of superior AI it can enable. Nvidia and AMD are leapfrogging Intel because unlike traditional processors, GPUs have hundreds or thousands of cores that can each handle recurring calculations over and over again, making them ideal for training AI. Intel knows it’s behind and it acquired deep learning startup Nervana Systems, autonomous vehicle experts Mobileye, and computer vision company Movidius, which builds the chips that power DJI’s drones. Intel has also invested $1 billion in AI startups, and it unveiled a new family of AI chips to take on AMD and Nvidia last year. Intel’s Neural Network Processor (NNP) is designed to speed up the training time for machine learning models, and the goal of the chips is to improve deep learning training speeds by 100 times by 2020. Intel still needs to show it can catch Nvidia and AMD with this AI and GPU work, though. ![]() Alongside all these chip battles, Krzanich also attempted to reshape Intel’s culture. Intel strongly opposed the gamergate controversy after it became involved following an advertising snafu. Intel pledged $300 million to focus on diversity, with Krzanich aiming for a “full representation in all levels” of its workforce by 2020. Krzanich also launched a project to tackle online abuse, and helped push through Intel’s war on conflict minerals. Intel must now hire a CEO that can make the company competitive in the race for AI, and ensure its traditional chip work doesn’t hit delays that could let competitors eat into its profitable datacenter dominance. Securing Intel’s future growth will be a tough job for Krzanich’s successor. Intel is in an odd position of market dominance and emerging threats that, in many ways, echos Microsoft’s position before Satya Nadella took over. Intel and Microsoft have followed in each other’s footsteps for decades under the famous Wintel alliance. While Microsoft has diversified its business thanks to the reach of software and its focus on the cloud, Intel has reacted more slowly. Intel now needs to find its own Satya Nadella who has the engineering knowledge to steer the company in the right direction, all while accepting that the company’s consumer relevance doesn’t necessarily matter anymore. If the future is the cloud and AI, Intel needs a strong leader to aggressively guide it there. Read More Intel now faces a fight for its future : https://ift.tt/2MN7t37(Reuters) - Intel Corp (INTC.O) Chief Executive Brian Krzanich resigned on Thursday after a company probe revealed that a consensual relationship he had with an employee violated company policy. The head of the largest U.S. chipmaker is the latest in a line of powerful men in business and politics to lose their jobs or resign over relationships viewed as inappropriate, a phenomenon highlighted by the #MeToo movement. âAn ongoing investigation by internal and external counsel has confirmed a violation of Intelâs non-fraternization policy, which applies to all managers,â Intel said in a statement. The board named Chief Financial Officer Robert Swan as interim CEO and said it has begun a search for a permanent CEO, including both internal and external candidates. Intel declined to give any further information about the probe. Intel shares fell 1.3 percent in early trade. Krzanich, 58, was appointed Intel CEO in May 2013, and was in charge of moving the companyâs focus to growing data centers from personal computers. Intel shares more than doubled during his tenure. He was recently credited with containing the fallout from the disclosure of some security flaws in the companyâs chips that could allow hackers to steal data from computers, although his sale of some Intel stock before the flaws were disclosed to investors attracted some criticism. âThere are no new payments as part of his departure,â a source familiar with the company told Reuters. Temporary replacement Swan has been Intelâs CFO since October 2016 and previously spent nine years as CFO of eBay Inc (EBAY.O). Intel recently raised its second-quarter revenue and profit forecast, saying it expects quarterly revenue of about $16.9 billion and adjusted profit of about 99 cents per share, up from a previous forecast of $16.3 billion in revenue and adjusted earnings per share of 85 cents. Analysts on average were expecting revenue of $16.29 billion and adjusted profit of 85 cents per share. Reporting by Munsif Vengattil in Bengaluru; Editing by Bernard Orr and Bill Rigby Nathan Bomey USA TODAY Published 1:47 p.m. UTC Jun 21, 2018 Intel CEO Brian Krzanich resigned suddenly after a "past consensual relationship with an Intel employee" came to light, the company said Thursday. His sudden exit comes after an internal and external investigation ordered by the company "confirmed a violation of Intel’s non-fraternization policy, which applies to all managers," Intel said. "Given the expectation that all employees will respect Intel’s values and adhere to the company’s code of conduct, the board has accepted Mr. Krzanich’s resignation," Intel said. Intel chief financial officer Robert Swan was appointed as interim CEO. Details of Krzanich's relationship were not immediately disclosed, including the identity of his romantic partner. Krzanich tried to guide the tech giant toward a growth path predicated on big data and self-driving cars. But he also had to grapple with security concerns regarding Intel's chips in consumer devices. He announced in January that the company would update its last five years of chips after concerns about their vulnerability to hacking emerged. Intel's stock rose 2% in pre-market trading to $54.50 after the company also projected promising revenue and profit figures for its second quarter. The company declined to make Krzanich available to comment. More: Ask HR: Tell the truth about dating at work. Also, can employers set smartphone rules? More: Intel CEO Brian Krzanich's embrace of the future snagged by flaws of past More: Intel's CES keynote: CEO vows quick fix to security flaw before unleashing the drones More: #MeToo isn't just a hashtag, it's destigmatizing — and 'that's 'huge' “The board believes strongly in Intel’s strategy and we are confident in Bob Swan’s ability to lead the company as we conduct a robust search for our next CEO," Intel chairman Andy Bryant said in a statement. "Bob has been instrumental to the development and execution of Intel’s strategy, and we know the company will continue to smoothly execute. We appreciate Brian’s many contributions to Intel." This story is developing. ![]() In a press release touting “another record year,” Intel dropped a a bombshell, announcing that CEO Brian Krzanich is resigning, amid revelations of a “past consensual relationship” with an employee. “Intel was recently informed that Mr. Krzanich had a past consensual relationship with an Intel employee,” the company notes in the release. “An ongoing investigation by internal and external counsel has confirmed a violation of Intel’s non-fraternization policy, which applies to all managers. Given the expectation that all employees will respect Intel’s values and adhere to the company’s code of conduct, the Board has accepted Mr. Krzanich’s resignation.” Krzanich is stepping down from both the chief executive position and the company’s board of directors half a decade after being appointed to the role. CFO Robert Swan has been named the company’s interim CEO in his stead. Swan has been in the CFO role since late-2016, having previous held the position at both eBay and Electronic Data Systems Corp. Here’s what he had to say on the matter, “Intel’s transformation to a data-centric company is well under way and our team is producing great products, excellent growth and outstanding financial results. I look forward to Intel continuing to win in the marketplace.” Meantime, Intel is looking in earnest for a more permanent replacement with both internal and external candidates. “The Board believes strongly in Intel’s strategy and we are confident in Bob Swan’s ability to lead the company as we conduct a robust search for our next CEO,” Intel Chairman Andy Bryant said in the release. “Bob has been instrumental to the development and execution of Intel’s strategy, and we know the company will continue to smoothly execute. We appreciate Brian’s many contributions to Intel.” Read More Intel's CEO resigns as information about a 'past consensual relationship' surfaces : https://ift.tt/2txNYmv[unable to retrieve full-text content] ![]() Intel Corp.'s (INTC) CEO is out. Bruce Krzanich resigned on Thursday, June 21 after it was revealed that he had a past consensual relationship with an Intel employee. "Intel was recently informed that Mr. Krzanich had a past consensual relationship with an Intel employee," the company wrote in a press release. "An ongoing investigation by internal and external counsel has confirmed a violation of Intel's non-fraternization policy, which applies to all managers. Given the expectation that all employees will respect Intel's values and adhere to the company's code of conduct, the Board has accepted Mr. Krzanich's resignation." Intel named Robert Swan, CFO, as the interim CEO. Swan has been an executive vice president and Intel's CFO since October 2016. "The Board believes strongly in Intel's strategy and we are confident in Bob Swan's ability to lead the company as we conduct a robust search for our next CEO. Bob has been instrumental to the development and execution of Intel's strategy, and we know the company will continue to smoothly execute. We appreciate Brian's many contributions to Intel," said Andy Bryant, Intel Chairman. Krzanich first became Intel's CEO in 2013 after having served as chief operating officer. He started his career there as an engineer in 1982 right after graduating from college. In its press release, Intel also announced that it expects to see second quarter revenues of $16.9 billion. Its second quarter results will be released on July 29. In premarket trading, Intel was up nearly 2% to $54.40. |
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