Intel (INTC) Stock: Can Lip-Bu Tan Spark a $208 Billion Comeback?
TLDR
Intel shares rose further as new CEO Lip-Bu Tan began his first day, extending Monday’s nearly 7% gain
Tan replaces Pat Gelsinger who retired after failing to turn around the struggling chipmaker
Tan’s compensation package could exceed $400 million if he triples the stock price
He must personally invest $25 million in Intel stock within his first 30 days
Intel’s stock has lost almost 40% of its value in the past 12 months
Intel’s stock continued its upward trajectory as Lip-Bu Tan officially took over as CEO of the struggling chipmaker on Monday, March 18, 2025. The company’s shares, which were Monday’s biggest Nasdaq gainer with a nearly 7% increase, extended their gains in premarket trading.
Tan steps into the role following Pat Gelsinger’s retirement late last year. Under Gelsinger’s leadership, Intel struggled to compete in the artificial intelligence (AI) space against global players like Taiwan Semiconductor Manufacturing Co.
According to Reuters, Tan is already considering major changes to Intel’s operations. These include revamping its chip manufacturing processes, overhauling its AI strategies, reducing middle management, and restructuring its contract manufacturing business.
The appointment of Tan, announced last Wednesday, has been well-received by analysts and investors. Tan previously served as CEO of Cadence Design Systems, a semiconductor software company that counts Intel among its partners.
Despite the recent rally, Intel’s stock has lost almost 40% of its value over the past 12 months. The stock is currently priced around $26, down more than half its value since December 2023.
In his letter to Intel employees, Tan acknowledged the “tough few years” the company has experienced. He noted that Intel is at “one of the most pivotal moments in its history.”
The challenge facing Tan is substantial. He needs to execute what could be a massive turnaround for the tech giant, which has fallen behind competitors in recent years.
The Intel board has structured an ambitious compensation package for Tan that directly ties his pay to company performance. The deal, dated March 10, could potentially be worth over $400 million if Tan meets all performance targets at the highest level.
For Tan to earn the full amount, he would need to triple Intel’s stock price. This would increase the company’s market capitalization by $208 billion to approximately $312 billion.
Farient Advisors CEO Robin Ferracone noted that “doubling the stock price gets you to where you were a few years ago, but tripling it to the $70 range—Intel hasn’t seen that since about 2000. So, it’s a big lift.”
Tan’s annual cash compensation includes a $1 million base salary with a target bonus of $2 million. He will receive an annual equity grant valued at $24 million starting in 2026.
As part of his sign-on package, Tan received a performance stock unit grant valued at $17 million and a stock option grant valued at $25 million. However, he must double the stock price and outperform the S&P 500 to earn the target number of performance stock units.
If Tan succeeds in tripling the stock price, the performance stock unit grant could be worth $153 million, according to Farient’s analysis. His stock options could be worth an additional $127 million in this scenario.
Personal Investment
A unique aspect of Tan’s compensation agreement requires him to personally invest $25 million in Intel stock during his first 30 days and hold it for five years. This means he could potentially lose money if his turnaround efforts fail.
Corporate strategy consultant Arjan Singh described it as “a high-stakes package that reflects both the board’s confidence in his ability to drive a turnaround and a strong commitment to pay-for-performance principles.”
Corporate governance expert Jason Schloetzer noted that the five-year vesting schedule is longer than usual. This could reflect the Intel board’s desire “to balance the aggressive target with not motivating excessive risk taking or cutting corners that create long-term harm.”
Intel stated that Tan’s compensation “reflects his experience and credentials as an accomplished technology leader with deep industry experience and is market competitive. The vast majority of his compensation is equity-based and tied to long-term shareholder value creation.”
The company also announced that interim co-CEOs Michelle Johnston Holthaus and David Zinsner would each receive $1.5 million in cash for their leadership during the CEO search. Frank Yeary, who served as interim executive chair, will return to being Intel’s independent chair and receive restricted stock units valued at $700,000 for his interim role.
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Filed under: News - @ March 18, 2025 12:27 pm