Intel Corporation (INTC) CEO Scandal Distracts From Impressive Numbers

Intel Corporation (Nasdaq: INTC) investors were blindsided Thursday when CEO Brian Krzanich announced his resignation due to an consensual relationship with another Intel employee. The unexpected departure may have rattled Intel shareholders, but analysts say the change of leadership could actually be a blessing in disguise.

Intel announced CFO Bob Swan will be taking over as interim CEO while the company searches for a permanent replacement.

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Bank of America analyst Vivek Arya says the departure is an opportunity for Intel to attract some outside talent, and everything Swan has touched has turned to gold during his tenure at Intel. Intel stock has gained more than 40 percent since Swan joined the company in September 2016. Arya says rising market sentiment has been driven by Intel's improving cost discipline, mix shift toward higher-growth data center products and improved communication with Wall Street.

Arya says Intel has also become more consistent in setting and beating quarterly expectations. "We substantially credit CFO/interim CEO Bob Swan for many of these initiatives, and hence expect no hiccups in execution during the CEO transition process," Arya says.

Arya says the CEO transition is an unfortunate distraction from the other Intel news announced on Thursday morning. Intel pre-announced second-quarter sales of $16.9 billion, a record for Intel and well above consensus analyst estimates of $16.3 billion. Pre-announced earnings per share of 99 cents also beat consensus estimates of 86 cents.

"No segment details were provided but we suspect Q2 was a continuation of strength from Q1 across PC and data center," Arya says.

Morningstar analyst Abhinav Davuluri says Intel may not even need to look outside the company for a suitable permanent replacement for Krzanich. Davuluri says chief engineering officer Venkata Renduchintala and senior vice president Sohail Ahmed are both qualified for the position.

In the meantime, Davuluri is still bullish on INTC stock.

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"Despite a declining PC market, we like Intel's scattershot approach to addressing challenges in computing, connectivity and memory," Davuluri says.

Bank of America has a "buy" rating and $70 price target for Intel. Morningstar has a "fairly valued" rating and $62 fair value estimate for INTC stock.



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