Intel had their earnings call this week and the Co-CEOs did an amazing job. Losing a CEO like Pat Gelsinger in an unplanned fashion is never easy. Gelsinger was well connected to Intel’s founding team, so he was more well regarded than most. The next CEO(s) already has a number of things to overcome, including animosity for his predecessor’s firing. But succession wasn’t solid in Intel, so instead of one replacement, two people were selected to run the company. This is the second time Intel has done this, and it didn’t work out well the first time. This means that the co-CEOs, who are temporary, have significant command and control problems because they aren’t permanent, and they aren’t one person. Intel was both undergoing a turnaround and significantly expanding its manufacturing capabilities that were tied to funding from the U.S. government which has largely killed that support. This is all to say the degree of difficulty is off the charts.
In short, this is not a job I’d wish on anyone, but despite that, Intel’s initial showing in its quarterly earnings report was impressively well done.
The Goal of the First Quarterly Report
With the departure of a well-regarded CEO (well, any CEO actually), there are three audiences that need to be effectively addressed, or the company will bleed valuation and revenue. Those three audiences are customers, employees and investors. These are the three critical legs of the stool, and you can’t ignore any of them.
These audiences will be highly skeptical of success, so setting a tone that comes across as honest, candid and humble without appearing weak while telling a credible story of impending future success is a huge ask, and few do this well. Of course it does help that the quarterly results beat expectations.
Generally, you measure the success of this kind of effort by the coverage it gets, and the coverage has been surprisingly good given the condition people expected Intel to be in given the removal of its CEO. For instance, CNBC, which was the most negative, still said, “Intel issues weak forecast, but beats on fourth-quarter results”. While the weak forecast is a concern, it establishes credibility, and beating the street with your results is always beneficial to the company reporting. Reuters just focused on the positive by headlining, “Intel’s quarterly revenue tops expectations as investors await new CEO”. Bloomberg was in line with the headline, “Intel Fourth-Quarter Sales Beat Estimates During Turnaround,” again focusing on the positive and avoiding most of the negative entirely.
This is all reflective of the fact that the executives presented themselves, and Intel, extremely well during the quarterly report presentation, and the financial media was more than satisfied with what they heard and saw. They clearly knew Intel was in trouble, but by the end of the call, they were generally on board with Intel’s direction and temporary leadership.
The Co-CEOs Performance
Michelle Johnston Holthaus went first and did an excellent job setting the tone for the presentation. She was candid, direct and stayed in her lane, which gave her co-CEO a strong foundation for his talk. Women CEOs are problematic given the current environment. They generally have to work harder, longer and under far more difficult circumstances as executives because large company executive teams and boards tend to be old white boys clubs. Intel has done a decent job over the years, and I think the semi-conductor industry at large has been better than most. AMD’s highly respected and recognized CEO Lisa Su is an example of that. While not all women CEOs are well trained (they are often selected because the job was badly screwed up by a male predecessor), that hasn’t been the case recently. In this market, Holthaus comes across as extremely well qualified and competent.
One thing Holthaus said really stood out as well thought through and delivered: “As co-CEOs, you can expect us to be very straightforward and direct. We will only make commitments we are confident we can deliver. We firmly believe that what we say is not nearly as important as what we do. And everything we do must be in service of our customers. Innovating to solve their most pressing challenges is the surest path to creating shareholder value.
This is the mindset I have brought to my position as the CEO of Intel Products. This is a great business with great people, partners and IP (intellectual property) to design world-class products from edge to cloud. I take nothing for granted, but I firmly believe that the core x86 architecture and the ecosystems we have built and invested in over the decades create a solid foundation for success.”
This was humble, helped establish a foundation of trust and made what followed all the more credible.
Dave Zinsner, the other co-CEO, addressed the elephant in the room: What was going to happen with Pat Gelsinger’s pet project to expand Intel manufacturing to become a strategic asset for the U.S.? His presentation was more nuts and bolts because Holthaus set such a strong foundation he didn’t need to build trust. That had already been done. He simply stated the progress, and that Intel continues to move to establish an independent subsidiary for Intel’s foundry business and why this business remains important to U.S. national security.
Because of the concerns that Intel is unique in having both FABs and foundry, he did spend some time talking about the importance of both efforts, while also pointing out that the company is focusing on reducing costs to improve overall financial performance, which again built trust and set in place some milestones that the financial media accepted.
Wrapping Up:
Intel’s co-CEOs Michelle Johnston Holthaus and Dave Zinsner had a strong performance for this quarter’s report, helped by Intel’s solid results and overshadowing a relatively weak forecast by providing direction that made it clear Intel was recovering and making progress. They were credible and did an excellent job of focusing their audiences on a stronger and brighter future for Intel.
They did an excellent job, and credit goes to the folks in Coms who helped write the presentations and the solid work done by the co-CEOs. Overall, this was very nicely done.
