Brian Krzanich became Intel‘s (NASDAQ:INTC) sixth CEO on May 16, 2013. Since then, Intel stock has rallied 46% — which seems solid, but merely matches the S&P 500’s 46% gain and underperforms the NASDAQ’s 72% gain. That performance isn’t bad, but many investors have wondered if Intel would fare better under a new leader.
Last May, fellow Fool Ashraf Eassa argued that it was time to replace Krzanich, due to Intel’s disastrous mobile strategy, its delayed transition from 14nm to 10nm chips, and the stock’s lackluster performance. But is Krzanich the real reason that Intel failed to outperform the market? Let’s take a closer look at the biggest problems with Krzanich’s leadership, and whether or not those flaws are dragging down Intel’s growth.
Intel dropped the mobile ball before Krzanich took over
To be fair, Krzanich was dealt a terrible hand in the mobile market when he became Intel’s CEO. In 2006, his predecessor Paul Otellini sold Intel’s ARM-based Xscale business to Marvell Technology, then rejected Apple‘s (NASDAQ:AAPL) offer to supply application processors for the first iPhone. At the time, Otellini didn’t believe that mobile chips would disrupt the PC market.
In 2008, Intel launched its low-power Atom x86 chip for netbooks and mobile devices, but the first generation chips were less power efficient than ARM designs. The Atom chips gradually improved over time, but that initial misstep enabled ARM chipmakers like Qualcomm (NASDAQ:QCOM) to take over the mobile market. ARM claims that 95% of all smartphones in the world now use its chip designs.
But Krzanich’s solutions were also ineffective
The good news is that Krzanich realized that Intel had to counter ARM in the mobile market. The bad news is that his solutions were expensive and ineffective.
Krzanich tried to win back mobile OEMs by giving them steep discounts on Atom…