Intel Corp. Chief Executive Brian Krzanich has resigned from the company effective immediately, the tech giant said Thursday, after he was found to have violated company policies through a past relationship with another employee.
In a release, Intel INTC, +0.59% announced that an investigation by internal and external counsel found that Krzanich violated the company’s “non-fraternization policy” when he had a “past consensual relationship” with someone else at the company. Intel’s policy “applies to all managers,” the company said.
Shares of the company closed down 2.4%, while the Dow Jones Industrial Average DJIA, +0.49% is down 0.8%.
Intel Chief Financial Officer Bob Swan will serve as interim CEO. Swan has been with the company since October 2016 and previously worked at General Atlantic LLC, an equity investment firm, as well as eBay Inc. EBAY, +0.21% Krzanich was an Intel veteran who began working at the company in 1982, shortly after graduating college.
When Krzanich’s predecessor resigned, it was the first time the company said it would look externally for a candidate, though Intel ultimately chose between three internal candidates. This time Intel again said it would seek out “both internal and external candidates.” Krzanich was the sixth permanent CEO in the Intel’s 50-year history, and all have been promoted from within.
Stifel analyst Kevin Cassidy remained relatively upbeat about the company’s prospects amid the leadership shift.
“Although we respect Mr. Krzanich’s efforts in redirecting Intel’s strategy from a compute-centric to a data centric company, we view Intel as a process-driven company with a deep bench of CEO candidates that can continue to drive the corporate strategy,” Cassidy wrote. “Somewhat offsetting this negative news, Intel pre-announced June quarter results to the upside, driven by what we expect to be higher margin Data-Center Group revenue.”
He raised his price target to $60 from $57 due to the company’s upbeat June-quarter outlook. Cassidy rates the stock at hold.
Intel projects about $16.9 billion in revenue for its second quarter and adjusted earnings per share of about 99 cents.
Eric Ross of Cascend Securities, meanwhile, was also disappointed that the company buried its good news about the current quarter within the announcement about Krzanich’s resignation.
“You’re killing us!” Ross wrote. “Preannouncement today of great Q (upside beyond high end of consensus) overshadowed by CEO sleeping around.” He has a $65 price target on the stock.
Evercore ISI analyst C.J. Muse, however, said that Krzanich’s departure was “clearly not a positive” given increasing competitive pressures from Advanced Micro Devices Inc. AMD, +0.96% and changes in the compute environment that are favorable to companies like Nvidia Corp. NVDA, -2.40% That said, he was upbeat about Swan and said that he and his team “hope the Board of Directors will consider him for the CEO role.”
Muse rates the stock at outperform with a $64 price target.
Cowen & Co. analyst Matthew Ramsay agreed that the news “comes at a difficult time for Intel,” and he thinks it’s unlikely that the company will manage to find a successor from within the company, rattling off a list of key senior executives who have left Intel going back to 2015. He said that Swan, with a lack of manufacturing experience, doesn’t seem like the right person for the permanent position.
“Obviously a seat like Intel CEO will attract many external candidates, but this seems a particularly tough time for additional leadership/culture churn at Intel,” wrote Ramsay, who rates the stock at market perform with a $54 target.