Coming In May: A New CEO Inside Intel

After 40 years Inside Intel –- the last eight as its first CEO from the sales and marketing ranks –- Paul Otellini surprised both Silicon Valley and Wall Street yesterday by announcing that he was stepping down as president, CEO and a director of the company at the next annual meeting in May. “I’ve been privileged to lead one of the world’s greatest companies,” Otellini says in a release, “…it’s time to move on and transfer Intel’s helm to a new generation of leadership.”

“The right successor,” Intel chairman Andrew Bryant tells the New York Times’s Quentin Hardy, “would preserve Intel’s engineering-driven culture but turn it into an organization that is better able to anticipate rapidly changing consumer tastes.”

Intel, whose glory days were tied to Microsoft and the PC, has seen its share price drop about 20% during Otellini’s reign, and the company has jettisoned about 20,000 workers. Still, it employs 100,000 people, and Intel chips power 80% of the PCs in the market. The Intel release announcing the departure cites several other accomplishments, both financial and structural, during Otellini’s leadership, including the fact that he “greatly expanded business partnerships and made strategic acquisitions.”

“We don’t see the PC category going away, but we see that the market has changed,” Bryant says. “We need to figure out what the market wants.” Not that Otellini wasn’t trying.

“Otellini has driven an effort to reduce the power demands of Intel’s processors so they can better compete in the mobile phone market,” write Financial Times’s Chris Nuttall, Richard Waters and Duncan Robinson, “but only a handful of smartphones have featured its chips to date. He has also sought to prop up the PC market with a new category of thin ‘Ultrabook’ laptops, yet high prices have kept sales low.”

Bryant tells the Wall Street Journal’s Don Clark and Joann S. Lublin that Intel, “in a shift from tradition, plans to consider external candidates to replace Mr. Otellini but has a ‘preference’ for internal ones.” 

“Otellini is from the generation when the PC was dominant,” Gartner analyst Ken Dulaney tells the Financial Times. “What they need now is a technology visionary, someone who sees the new markets and is from a younger generation.”

Some outsiders mentioned by industry observers include David DeWalt, former CEO of McAfee (now an Intel property), William Nuti, president and CEO of NCR Corp. and Pat Gelsinger, who left Intel to run VMware. Insiders include COO Brian Krzanich, who was promoted to executive vice president yesterday, along with Renee James, head of Intel’s software business, and CFO Stacy Smith. Another leading candidate for the position, Sean Maloney, suffered a stroke in 2010 and announced his own retirement from Intel a couple of months ago. 

All Things Digital’s Arik Hesseldahl takes a look at these candidates and others in a piece that points out “for the first time in Intel’s 45-year history, the CEO is retiring without a blatantly obvious successor teed up and ready to take over.”

By most accounts, the decision was strictly Otellini’s and caught most observers – including his boss – off guard. "I did try to encourage him to stay longer," Bryant tells Clark and Lublin. "He said, 'I think it’s time to make the transition now.'"

Otellini was unavailable to reporters for comment yesterday beyond the statements in the release.

“A generally well-liked San Francisco native with an M.B.A. from Berkeley, Mr. Otellini was considered a break from Intel’s norm when he became chief because he was not formally trained in engineering,” writes the Times’ Hardy.

That said, not everyone was doling out praise. “With CEO Paul Otellini, it was X86 – Intel’s own processor architecture – or nothing. A myopic strategy that proved to be catastrophic for Intel’s future,” writes Jean-Baptiste Su in Forbes.

And a story by Forbes’ Eric Savitz carries the hed, “Why Did The Board Boot Paul Otellini? And Now What?” Savitz cites the observations of four analysts who enumerate the challenges facing Intel – particularly the inroads made by rival ARM processors – but none directly suggests that Otellini was “booted.”

Looking at the field of potential successors, FBR Capital Markets & Co. analyst Craig Berger tells Bloomberg Businessweek’s Ian King : “I don’t know if any of them have the star power that you may need in a new Intel CEO. It’s going to be a difficult and challenging transition for anybody.”

But as surely as Intel co-founder Gordon Moore’s Law has proven to be an industry truism, the chips will fall come May.

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