Partners: Gelsinger’s Sudden Exit From Intel Stirs Doubt About Its Strategy

In interviews with CRN on Monday, executives at U.S. solution providers that partner with Intel voice concerns about the company’s future in light of Pat Gelsinger’s sudden exit and say it should focus on its traditional CPU and nascent Gaudi accelerator chip businesses.

Intel channel partners said the sudden departure of CEO Pat Gelsinger is raising questions about the company’s current strategy, which has put an extra emphasis on expanding its manufacturing capabilities on top of its chip design business.

In interviews with CRN on Monday, executives at U.S. solution providers that partner with Intel voiced concerns about the company’s future in light of Gelsinger’s exit and said it should focus on its traditional business, which includes Core CPUs for PCs and Xeon CPUs for servers, in addition to its nascent Gaudi product line for AI servers.

Erik Stromquist, chairman of Beaverton, Ore.-based Chrome device manufacturer CTL, said the abrupt retirement of Gelsinger, which the company announced Monday morning, has created uncertainty about Intel’s current strategy because of how integral the chipmaker veteran was to creating and championing it.

“Obviously this is not good news, because Pat was the strategy,” he said.

Multiple reports, including one by Bloomberg, said Intel’s board of directors gave Gelsinger a choice to resign or be fired after it had lost confidence in his comeback plan, which has involved the company spending tens of billions of dollars to expand its manufacturing footprint as well as its advanced chip-making capabilities.

One silver lining Stromquist has found is the news that Michelle Johnston Holthaus, a veteran sales and channel executive who most recently led Intel’s Client Computing Group, will serve in the newly created role as CEO of Intel Products, which consists of the client business, the Data Center and AI Group and the Network and Edge Group.

Holthaus was also named interim co-CEO alongside Intel CFO David Zinsner.

“Michelle is a seasoned leader. I’ve known her for a long time, so I think she’s a good steward of the Intel business, [and] she’s a good choice to co-lead the company. But obviously [Gelsinger’s sudden exit] is someone saying there’s doubt in the previous strategy,” Stromquist said.

In Intel’s announcement about Gelsinger’s retirement, Frank Yeary, a longtime Intel board director who now serves as its interim executive chair, said the chipmaker must “put our product group at the center of all we do.”

“Our customers demand this from us, and we will deliver for them,” he said in a statement while adding that Intel will continue to advance its manufacturing and foundry capacities.

To Stromquist, Intel should now focus on going “back to the basics of working with their [partners] and coming up with great solutions.”

“Maybe that historical business of Intel’s go-to-market needs to be questioned. I don't know. But I always encourage them to do what they’ve done best, which is build a great channel, build great products, and business will follow,” he said.

Gelsinger Credited For Righting A ‘Very Big Ship’

An executive at a U.S. Intel distribution partner said that even in the absence of news reports explaining why Gelsinger retired on Sunday, the timing and nature of how the exit was announced made it likely that the CEO’s departure wasn’t voluntary.

“Usually, when somebody retires from Intel, there’s a much longer process,” said the distribution executive, who asked to not be named to speak frankly. “They announce that they’re retiring. They usually stay on for a transition period and do all those kinds of things in a very long and drawn-out period, not, ‘I’m retiring, and today’s my last day.’”

With Intel’s board of directors now searching for Gelsinger’s permanent successor, the distribution executive said he hopes that whoever ends up taking over will make a big priority out of executing on Intel’s chip road maps.

He added that Gelsinger, who worked at Intel for 30 years prior to his three-year tenure as its CEO, should get a lot of credit for doing what he can to improve Intel’s position, which was in a shaky place before the company veteran took over.

“I think Pat did a lot of things to get a very big ship sort of pointed in the right direction. I don’t think that there’s a [U.S.] CHIPS Act without Pat Gelsinger. I don’t think there’s a focus on U.S. semiconductor manufacturing without him,” he said.

Like Stromquist, the distribution executive was glad to see Holthaus taking elevated leadership roles within the company.

“She’s somebody who knows Intel very well. She knows all of the channel business really well. She knows all of Intel’s lines of business, so I think she’s got a really good, broad understanding of Intel's different customer bases, which for us as a distributor, that's important,” he said.

Partner: Gelsinger Was A ‘Scapegoat’ For Wall Street

Randy Copeland, president and CEO of Richmond, Va.-based Velocity Micro, said while he didn’t find the news of Gelsinger’s sudden exit surprising, he didn’t think it was the “wisest decision” because of how much Intel has transformed over the past three years to execute on Gelsinger’s expensive and ambitious IDM 2.0 strategy.

“They’re going to get a new CEO in who’s going to have a whole new vision and a whole new road map, and I think it’s going to mire them some more. Pat’s plan was extremely aggressive, but they’re so far into it, now I am concerned about what’s going to happen next. Are they going to pivot again and go in another direction? I feel like they just can’t seem to get anything finished,” he said.

To Copeland, the board should have been better prepared to weather any challenges that came with Gelsinger’s comeback plan, which also involves the revitalization of the company’s contract manufacturing business under the Intel Foundry name.

“It was a very long-term plan, and I think before the board approved it, they should have thought about what the next [few] years were going to look like, because they're obviously deep in the middle of it,” he said.

While Copeland said Intel is “still years away from catching up” with Taiwanese foundry giant TSMC, he believes the bet on contract manufacturing could still work out.

“If they can come up with a bona fide competitor that is U.S.-based in a few years, I have very high confidence that Intel is going to be a formidable company,” he said.

Despite feeling uncertain about Intel’s future, Copeland doesn’t think the company faces any existential threat, even if he doesn’t think its problems end with Gelsinger.

“I don’t think they’re going to completely implode or anything, but I think they are using Pat as a scapegoat for a company-wide strategy that’s not going as fast as Wall Street would like it to,” Copeland said.

Partner Sees Struggles With Gaudi, Xeon Chips

Dominic Daninger, vice president of engineering at Burnsville, Minn.-based Nor-Tech, said he was surprised to hear the news about Gelsinger.

“I thought he was only part-way done, but apparently there was dissension on the board. When there’s not unification there, that’s not good,” he said.

While Intel has made progress in expanding its manufacturing footprint, introducing advanced chip-making nodes at an accelerated pace and named a couple marquee customers for Intel Foundry, those projects have yet to boost its financials.

“I think it’s taken longer than anybody thought,” Daninger said.

The Nor-Tech executive added that Intel has also struggled to introduce a formative accelerator chip that could rival Nvidia’s GPUs in AI computing. While Intel’s new Gaudi 3 chip has gained support from multiple large server vendors, including Dell Technologies and Hewlett Packard Enterprise, Gelsinger said in October that the Gaudi product line is expected to fall short of its modest $500 million revenue goal for 2024.

“If you go back [and look at] multiple attempts to go after that [market], just none of them have been successful,” Daninger said.

One bright spot for Daninger is Intel’s recently launched Xeon 6 server processors. But even then, he said, those products have received a muted response among his customers, many of whom are in the high-performance computing space.

“The last generations of Xeons have been very reliable [with] pretty decent performance. And all the reports I'm seeing on Xeon 6 are good. We’re just not getting a lot of people beating the doors down here to test them out,” he said.

To Daninger, Gelsinger’s sudden exit suggests that big changes are on the way.

“They’ve got to do some major strategy changes and get serious about some things here, and there's probably a lot of lot of entrenchment there within corporate Intel,” he said.

Partners See Potential For AI Sales Growth With CEO Shakeup

Two solution provider executives said they hope that Gelsinger’s sudden exit could allow the chipmaker to put a bigger emphasis on driving AI sales with enterprises.

“I think this could lead to a stronger position for Intel in the enterprise AI solutions market,” said Patrick Shelley, CTO at Montvale, N.J.-based PKA Technologies, which is No. 438 on CRN’s 2024 Solution Provider 500 list.

In September, Intel outlined its strategy around Gaudi 3, which rests on the idea that enterprises will seek out Gaudi chips for AI systems that are more cost-effective than Nvidia GPU-based systems for running smaller AI models.

“Intel is already doing some real innovative things in the AI market especially with Gaudi 3, which is a much more cost-competitive AI solution for the enterprise. We think that is going to make AI more affordable for customers especially in SLED (State Local and Education). I see this driving more innovation for Intel in the enterprise AI market,” Shelley said.

Bob Venero, CEO of Fort Lauderdale, Fla.-based Future Tech Enterprise, No. 76 on the CRN’s 2024 SP500, said he remains confident that Intel will continue to be a key player in the AI era, particularly when it comes to the PC market.

“I see Intel continuing to grow its AI business especially with the PC continuing to be more and more of an important part of the ecosystem that is going to be tied to AI,” he said. “The way you access AI systems is through your PC and the best way PCs run is on Intel chips. Pat’s retirement doesn’t change that. It just means there is going to be a new CEO who leads Intel into the AI future.”

Venero said he would like to see Intel double down on product innovation with its key OEMs like HP Inc., Dell and Lenovo.

“Those are the companies that are driving the major investments in R&D around the PC product set,” he said. “That is where Intel needs to invest in differentiated products that can help drive the journey to AI and beyond.”

Even with the changing of the guard, Intel remains one of the strongest technology product companies in the business, according to Venero.

“Look at the long line of x86 products that has driven decades of productivity and growth for the channel. Without Intel there wouldn’t be much of a channel. Think about who is running all the PCs, servers and the chipsets on the storage platforms: It’s Intel, Intel, Intel. There are other players there but nobody with the depth and breadth of the product line that Intel offers,” he said.

Venero said he expects the new leadership and Gelsinger’s eventual replacement to continue to be strong supporters of the channel.

“Intel has always been a channel-first company,” he said. “The new executives obviously know the value of the channel. I doubt they would make any drastic change as it relates to supporting its channel partners.”

Additional reporting by Steven Burke.