Daily Management Review

Intel Shares Fall As It Is Downgraded By Nomura Due To ‘Lack Of Leadership’ After CEO Exit


06/25/2018




Nomura Instinet predicted that there would be a negative impact on the share prices of Intel because of the company’s surprising management turnover.
 
There would be addition to the concerns about the strategy of the company because of the search for the company's next CEO, said Nomura and as a consequence lowered the rating of Intel to neutral from buy for its shares.
 
Because of his alleged relationship with a co-worker, Intel board forced the resignation of the company’s CEO Brian Krzanich on Thursday according to the company announcement as the relationship was in violation of the company policy on nonfraternization which arises from a consensual relationship. Intel said that the policy which spelled out in no uncertain terms that no employee in the capacity of a manager can have any relationship with any employee who is under direct or indirect control of the manager and Krzanich violated that policy. The current chief financial officer Rebert Swan replaced the outgoing CEO on an interim basis.
 
“CEO Krzanich’s departure is disappointing on multiple levels. We believe the lack of leadership will only add to the already growing uncertainty about Intel’s long-term franchise," analyst Romit Shah said in a note to clients Monday. "Our point is that INTC’s multiple started compressing before Mr. Krzanich’s departure; lack of clear leadership will likely only add to the already growing uncertainty about Intel’s long-term outlook.”
 
There was a fall of 1.8 per cent in the shares of the company in early trading on Monday following news of the report. But compared to the 3 per cent return at S&P 500, the shares of Intel is up 14 per cent this year till Friday last week.
 
And representing 5 percent upside to Friday's close, Shah reduced his price target to $55 from $60 for Intel shares.
 
The problems that are being faced by Intel in moving to the technology for the manufacturing of the next-generation chips was also noted by the analyst.
 
The company had delayed volume production under its 10-nanometer chip manufacturing process to next year, Intel had said on its April 26 earnings conference call. At the same time, rival AMD has announced that the company has plans to begin production of next-generation 7-nanometer chip in late 2018.
 
“We believe the most likely scenario is that Intel promotes Dr. Murthy Renduchintala who oversees most of Intel’s product groups. Dr. Renduchintala is a well-respected engineer but we think won’t immediately convince investors that Intel can overcome its challenges,” Shah said. “We believe Intel needs to hire an external candidate such as Hock Tan at Broadcom or Sanjay Jha from GlobalFoundries that have a proven track record of driving shareholder value.”
 
(Source:www.cnbc.com)






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