In a move that could have broad ramifications in the technology landscape, Intel announced that VMware CEO Pat Gelsinger will replace Intel's interim CEO Bob Swann on February 15. The question is why he should quit his job to run a struggling chip giant.
The bottom line is that he has a long history with Intel, working with some of the biggest names in the chip industry's tradition before joining VMware in 2009. It must be a thrill for him to go back to his roots and try to restart the company.
"I was 18 when I joined Intel, fresh out of the Lincoln Technical Institute. Over the next 30 years of my tenure at Intel, I have had the honor of mentoring Grove, Noyce, and Moore, "Gelsinger wrote in a blog post announcing his new position.
Certainly Intel has recognized that Gelsinger's history and deep executive experience should help as the company attempts to compete in an increasingly aggressive chip industry landscape. "Pat is a proven technology leader with a proven track record of innovation, talent development and a deep understanding of Intel. It will continue a values-based cultural leadership approach with a focus on operational execution, "Omar Ishrak, Intel's independent board chairman, said in a statement.
But Gelsinger is falling into a mess. As my colleague Danny Crichton wrote in his year-end review of the chip industry last month, Intel is far behind its competitors and it will be difficult to catch up:
Intel has made numerous strategic mistakes over the past two decades, most notably completely missing out on the smartphone revolution and also the custom silicon market that has become famous in recent years. It's also just generally lagging behind in chip-making, an area that once dominated and is now behind Taiwan-based TSMC, Crichton wrote.
Patrick Moorhead, founder and principal analyst of Moor Insights & Strategy, agrees with this statement, stating that Swan has been given a bad hand, coming in to clean up a mess that has years long deadlines. While Gelsinger faces similar problems, Moorhead thinks he can refocus the company. "I don't anticipate any major strategic changes with Gelsinger, but I expect him to focus on the company's engineering culture and bring it back to an execution culture," Moorhead told me.
The announcement comes against the backdrop of a massive consolidation of the chip industry last year with more than $ 100 billion changed hands in four deals with NVidia that grabbed ARM for $ 40 billion, the AMD-Xilink deal from $ 35 billion, Analog impacting Maxim for $ 21 billion and Marvell grabbing Inphi for just $ 10 billion, not to mention Intel dump its memory unit on SK Hynix for $ 9 billion.
As for VMware, it now needs to find a new CEO. As Moorhead says, the obvious choice will be current COO Sanjay Poonen. Holger Mueller, an analyst at Constellation Research, says it will be up to Michael Dell who to give the reins, but he believes Gelsinger was stuck at Dell and wouldn't get a larger role, so he left.
"VMware has a profound test bed, but it will be up to Michael Dell to find a CEO who can innovate on the software side and keep VMware's unique DNA strong within the Dell portfolio. Dell needs the deeper profits from this business for the its turnaround, "he said.
The stock market appears to be liking Intel's move with the company's shares up 7.26%, but not so much for VMware, whose shares have fallen to nearly the same level of 7.72% since publication.