Pat Gelsinger is leaving Intel with a significant payday. Gelsinger rose to Chief of Technology during a 30-year stint at Intel. In 2009, he departed Intel to run VMware, but later came back as the CEO of Intel in 2021. He set out to compete with TSMC and Samsung in chip manufacturing. Intel’s board says it wants Intel to be able to compete more effectively.
The board offered him two choices, to either resign or be fired. Directors felt Gelsinger’s plan was not working fast enough. He spent $100 billion to build chip fabs (a factory where integrated circuits are manufactured) in Ohio, Arizona, and elsewhere and received a $7.86 billion grant from the U.S. CHIPS and Science Act. CNBC noted that this strategy reduced Intel’s free cash flow and increased the company’s debt.
The directors concluded Gelsinger’s plan was not working because of the insufficient revenue from chip manufacturing contracts from Amazon and Microsoft, which dropped thirty-three percent in Intel’s revenues. The company’s stock price plummeted sixty-six percent.
Intel’s revenues declined because Intel was too dependent on selling chips for PCs and demand fell rapidly. They were so dependent on chips for PCs because, starting in the 1980s, Intel was the leading chip company. They sold eighty percent of the CPUs used for PCs. Later, the company adapted to larger data center computers.
In recent times, Intel declined an opportunity to manufacture chips for the iPhone. Intel did this because they did not envision enough profit potential from the contract. The company’s Gaudi AI chip failed in the generative AI chip market.
Gelsinger is set to receive 18 months of his base annual salary of $1.25 million. He will also receive one and a half times his target bonus of 275% of the annual wage, about $3.4 million. He would also be eligible for 11/12ths of his 2024 bonus since he stepped down on December 1st.
According to CNN, “Gelsinger also owns roughly 646,000 shares in Intel as of a November regulatory filing. These days, that’s worth more than $14.5 million.” In August, Intel announced the layoff of 15% of its staff so they can reach its goal of slashing $10 billion in costs.