Coverage: Intel CEO out after relationship with employee

Intel Corp.’s Brian Krzanich was forced out as CEO following an investigation into a “consensual relationship with an Intel employee,” the company announced Thursday.

Sara Salinas of CNBC.com had the news:

Chief financial officer Robert Swan will step in as interim CEO, effective immediately, and the board has already begun the search for a permanent replacement.

“An ongoing investigation by internal and external counsel has confirmed a violation of Intel’s non-fraternization policy, which applies to all managers,” the company said in a statement. “Given the expectation that all employees will respect Intel’s values and adhere to the company’s code of conduct, the Board has accepted Mr. Krzanich’s resignation.”

Krzanich violated a policy that said managers cannot have relationships with people who report to them either directly or indirectly. The relationship ended and took place “some time back,” people familiar with the situation told CNBC. It’s unclear with whom Krzanich, 58, had the relationship.

The company was only recently made aware of the relationship, at which point it began probing and Krzanich was asked to resign, the people said.

Chris Welch of The Verge reported that the company has faced criticism due to security flaws:

Over the last year, Krzanich and Intel have faced scrutiny over their reaction to the major security flaws known as Meltdown and Spectre. The dire situation triggered a coordinated response in deploying patches and firmware fixes throughout the computing industry. But some of the updates proved buggy. Last November, Krzanich sold off roughly $39 million worth of Intel shares — after the company had been informed of the far-reaching Spectre problem. That raised suspicions of insider trading, but Intel said the stock sell-off was unrelated to Spectre.

Krzanich was tasked with evolving Intel beyond the sluggish PC market after decades spent comfortably atop the chip manufacturing world. His goal, as outlined in this 2016 memo, had been to “transform Intel from a PC company to a company that powers the cloud and billions of smart, connected computing devices.”

Intel says it’s still adhering to that strategy after forcing out Krzanich. “The board believes strongly in Intel’s strategy and we are confident in Bob Swan’s ability to lead the company as we conduct a robust search for our next CEO,” Intel chairman Andy Bryant said. “Bob has been instrumental to the development and execution of Intel’s strategy, and we know the company will continue to smoothly execute. We appreciate Brian’s many contributions to Intel.”

Munsif Vengattil and Stephen Nellis of Reuters reported that the Intel management bench is thin:

In its 50-year history, Intel has never appointed a permanent CEO who did not come up through the company’s ranks.

But those ranks are thinner than they used to be, with prominent Intel executives such as former CFO and manufacturing chief Stacy Smith, former president Renee James, ex-architecture chief Dadi Perlmutter and Dianne Bryant, who headed the data center group, leaving in recent years.

Instead, Krzanich’s replacement could end up being one of the outsiders he brought into the company’s executive ranks, a sort of “insider outsider” such as Murthy Renduchintala, Intel’s chief engineering officer who joined Intel in 2015 after helping lead Qualcomm’s chip business.

“They’ve got some very good people they’ve brought in,” said Dan Hutcheson, CEO of VLSI Research Inc, who “know the company, know the new direction. It’s not a turnaround story.”