Prior to the October meltdown last year, semiconductors had enjoyed years of unprecedented market growth. Companies such as Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD) gave shareholders plenty of reasons to smile. Certainly, Intel (NASDAQ:INTC) also received some love. The difference was that Intel stock was a clear laggard.
Over the trailing five years, shares of INTC more than doubled. While impressive, the performance didn’t move the needle like its rivals. During the same time period, NVDA gained nearly 845%, while AMD was no slouch at 572%. Against those figures, you can’t help but feel the missed opportunities in INTC stock.
That said, Intel is moving forward with a new direction. Last week, the chipmaker announced that its former CFO and interim CEO Bob Swan has officially taken the top role. To many analysts and observers, the announcement raised eyebrows.
For one thing, Swan has a short tenure with INTC, having arrived in 2016 from private-equity firm General Atlantic. Management spent several months searching for a permanent replacement for former CEO Brian Krzanich. As you may recall, Krzanich resigned his post after the company discovered his extra-marital affair with a subordinate.
Naturally, the chipmaker sought someone with impeccable credibility and integrity. During the Krzanich fiasco, Intel stock took a hammering. But the organization also desperately needed someone who could reinvigorate their production woes in regard to next-generation chips. From management’s view, they ceded unnecessary ground to Nvidia and AMD.
Therefore, many analysts felt unsure about Swan’s skill sets. While he obviously has the smarts, he lacks experience in the semiconductor arena. Prior to General Atlantic, Swan served as the CFO of eBay (NASDAQ:EBAY) for nine years. Moreover, his formative years were at General Electric (NYSE:GE).
Nevertheless, Swan is a solid pick for INTC stock. Here’s why:
Intel Stock to Benefit From Proven Leadership
What Intel and, by logical deduction, Intel stock needs now is leadership — proven, reliable and perhaps boring leadership. Contrary to those critical of Swan’s appointment, the semiconductor firm doesn’t need “tech” leadership.
Would it be great to have someone well-versed in both the financial and technological components of INTC stock? Absolutely! However, executive-level techies, for all their game-changing ideas, can often be irrational or, at least, unpleasant.
A great example is Apple (NASDAQ:AAPL) founder Steve Jobs. While we celebrate Jobs as a true visionary and pioneer, he also suffered many failures. He had to eat a healthy dose of humble pie before turning Apple into an icon.
Right now, INTC needs results and a positive path forward. Of course, technological acumen would help navigate Intel’s problems with its long-overdue 10-nanometer nodes. But after that issue finds resolution, what next? At a certain point, an Intel CEO must be more than a human encyclopedia. Ultimately, the chief exec will drive the company’s direction for years to come.
If you’re heavily vested in INTC stock, you’ve got to feel good about Swan. He learned tough lessons about market irrationality when he took the reigns of ill-fated grocery delivery service Webvan during the tech bubble. Later, he applied these lessons at eBay, investing in the predecessor to the prevalent Venmo app.
In other words, Swan has a great sense of what works and what doesn’t. When he does feel confident about a venture, he has no problem pulling the trigger. For instance, Swan and his team spent $800 million in 2013 acquiring payments startup Braintree, which later developed Venmo.
More than likely, the new CEO will lead INTC toward profitable decisions. Just as importantly for Intel stock, he’ll avoid bad ones.
Don’t Discount Swan’s Tech Cred
I don’t think it’s any coincidence that INTC stock has responded positively to Swan’s appointment. While shares were muted on announcement day, they have soared since then.
In my estimation, Wall Street has reexamined the new chief exec’s credentials, and have responded positively to his potential. While critics still assert that Swan is merely a “finance guy,” I don’t think that descriptor does him justice.
For example, I concede that General Atlantic is a private-equity firm. However, this finance joint represented major backing for disruptors Uber and Airbnb. These two have revolutionized the way we think about the transportation and hospitality industries, respectively.
In addition, Swan helped fund smaller tech startups like AppDynamics. Eventually, this firm found a suitor in Cisco Systems (NASDAQ:CSCO) for a whopping $4 billion.
Bottom line: Don’t underestimate Bob Swan. While he doesn’t appear like the prototypical tech executive, he’s the perfect answer for Intel stock.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.