Intel Corporation (INTC) shareholders are extolling the need for strong leadership as the semiconductor sector shifts.
Patrick Terrion and Jeff Anello, principal and vice president of investment management respectively at Founders Capital Management, a Hartford-based investment advisory firm that holds 268,320 shares of Intel told Real Money that a leader needs to help make the business more flexible given the current market.
The company has been without a permanent CEO since Brian Krzanich, Intel's CEO since 2013, resigned in June after it was revealed that he had a past consensual relationship with an employee.
Finding Flexibility
"We're looking to see how Intel can compete as the semiconductor ecosystem changes," Terrion explained. "The cadence of Moore's law used to be two years and now the timeline is closer to four years. Intel needs to show it can adapt."
He explained that a strong leader is key to making sure that the right moves are made for the company.
Terrion added that the longer time period that the cadence stretches out across, the greater the opportunity is for competitors to eat away at Intel's dominant market share. He zeroed in on Advanced Micro Devices, Inc. (AMD) as the chief benefactor of this prolonged cadence that will sting Intel's business model.
Terrion said that the company must look to become more flexible in the face of this significant challenge.
"There's certainly a business model change as far as outsourcing chip fabrication, like what AMD is doing," he explained. "It's like Nike, Inc. and Converse. Converse got killed because they tried to do everything from soup to nuts and was left without Nike's flexibility."
An outsider CEO who comes in and takes a look at these options would be a vital step in potentially altering the course towards a more flexible and ultimately profitable path in his view.
AMD Precedent
This type of leadership change has acted to the detriment of Intel in the past, as chief rival AMD's Lisa Su has become a superstar CEO in her own right.
TheStreet founder and AAP portfolio manager Jim Cramer has lauded her as a "miracle worker" in the past.
"Not only did she turn AMD around, she turned it into arguably the best player in the space," Cramer said in a preface to an interview with Su on CNBC. "They seem to be running circles around Intel."
To be sure, he and Anello stated that they are confident in Intel's board, noting that the board is likely aware that a new, permanent CEO is necessary to properly govern the company.
Anello pointed out that Intel could likely learn a great deal from Microsoft, which saw its monopoly dismantled in a somewhat similar fashion to how Intel has seen its market dominance fade.
They both expressed confidence in Intel's board and remain long term investors in the stock.
"I'm not saying that the CEO issue or the production problems aren't impactful," Terrion explained. "But there's no reason for us to sell or anything like that right now. We're strategic investors for the long term."
