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Intel (INTC) CEO Resigns on Past Relationship, Ups 2Q18 View

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Intel (INTC - Free Report) recently announced that Brian Krzanich has resigned as the CEO and also from its board of directors after the company learned about Krzanich’s “past consensual relationship” with an employee. The company’s CFO, Robert Swan has been appointed as the interim CEO.

Intel verified the matter with an investigation through external and internal counsel. The scrutiny authenticated the violation of the company’s non-fraternization policy relevant to all manager level employees.

The chipmaker accepted Krzanich’s resignation. Meanwhile, Swan said, “Intel’s transformation to a data-centric company is well under way and our team is producing great products, excellent growth and outstanding financial results. I look forward to Intel continuing to win in the marketplace.”

The board is actively looking for a candidate to take over as permanent CEO. In this regard, a top executive search firm is aiding the procedure.

Following the news, shares of the company declined more than 2%, yesterday. Notably, Intel’s stock has returned 58.5% year to date, outperforming the industry’s rally of 57.6%.






Krzanich’s Journey in Intel

Krzanich joined Intel as an engineer in 1982. Krzanich was elevated to the position of CEO in May 2013. Krzanich’s efforts in diversifying the company’s product portfolio are commendable. Under his leadership, Intel expanded its footprint in artificial intelligence (AI), autonomous vehicles, and cloud computing and other emerging technologies.

During Kzranich’s term, the company bolstered machine learning capabilities and augmented its solutions in augmented as well as virtual reality.

We remain hopeful that the new as well as the interim CEO will persist with the efforts in self-driving cars and emerging tech. However, work needs to be done on products to aid the chipmaker sustain the leading market share in GPU shipments.

Raised 2Q18 Outlook

Realizing the gravity of the matter, the chipmaker cleverly timed the resignation announcement with a revision in the second quarter of fiscal 2018 guidance. The raised outlook bodes well. Moreover, the company is optimistic to deliver “another record year” in 2018.

Intel now envisions second-quarter fiscal 2018 revenues to come in at approximately $16.9 billion, up from the initial projection of $16.3 billion. The projected figure is better than the Zacks Consensus Estimate of $16.3 billion, representing growth of around 10.3% year over year.

Earnings are now anticipated to be 99 cents per share, considerably higher than the previously estimated 85 cents per share. The Zacks Consensus Estimate is pegged at 86 cents, translating to a year-over-year increase of 19.4%.

The company will provide a revised guidance on fiscal 2018 when it announces second-quarter earnings on Jul 26.

To Conclude

Intel, a comparatively late entrant in the autonomous driving industry, is increasing efforts in the space. The initiated testing of around 100 self-driving cars in Jerusalem deserves a special mention. Acquisition of Israel-based MobilEye, last year has been assisting the company a great deal. Recent collaboration with Mapbox, a mapping startup, also bodes well in this regard.

Notably, autonomous driving backed by AI is expected to reduce accidents due to human errors. Per a recent report by Grand View Research, the ADAS market is expected to hit $67.43 billion by 2025. Given the alluring prospects, the company can make the most of this growth opportunity if the cards are rightly played.

However, intensifying competition from Advanced Micro Devices’ (AMD - Free Report) products, including second generation Threadripper CPU powered by Ryzen technology is a threat.

Per a JPR report, although Intel continues to be a leader, its market share in GPU shipments in the first quarter of 2018 dipped from 67.4% to 66.6%. On the other hand, AMD impressively increased its GPU shipments and gained market share from 14.2% to 14.9%. Meanwhile, NVIDIA (NVDA - Free Report) maintained its market share at 18.4%.

It is evident from the estimates that AMD’s gain is Intel’s loss, which remains a matter of concern.

Zacks Rank & Stock to Consider

Currently, Intel carries a Zacks Rank #3 (Hold).

Micron Technology, Inc. (MU - Free Report) , sporting a Zacks Rank #1 (Strong Buy) is worth considering.  Micron delivered non-GAAP earnings of $3.15 per share, beating the Zacks Consensus Estimate of $3.14 and higher than the guided range of $2.83 (+/- 7 cents). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Micron is currently pegged at 8.2%.

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