Longtime Intel (NASDAQ: INTC) CEO Paul Otellini has announced he will retire in May 2013 after nearly 40 years at the company and only the fifth CEO in the company's 45-year history. The chipmaking giant says it will consider both internal and external candidates for the job.
"After almost four decades with the company and eight years as CEO, it’s time to move on and transfer Intel's helm to a new generation of leadership," stated Otellini. He indicated he will be "available as an advisor to management after retiring as CEO."
Otellini "managed the company through challenging times and market transitions," acknowledged Intel chairman Andy Bryant. Indeed, the electronics world these days is far from the one reliant upon PCs in which Intel once dominated when Otellini first took office -- PC demand has waned (and has started to spill over into the enterprise side), macroeconomic malaise continues to stifle demand, emerging markets aren't as hot for PCs as they once were. And despite Intel's push with Ultrabook platforms to target the mobile device upsurge, it's still largely in an uphill battle against ARM-based technologies there.
So let the speculation begin: who's next in line? In the same statement as Otellini's retirement, the company acknowledged the promotion of three new EVPs: Renee James, head of Intel's software business; Brian Krzanich, COO and head of worldwide manufacturing; and Stacy Smith, CFO and director of corporate strategy. One might assume these will be among the internal frontrunners, along with David Perlmutter, current EVP/GM of the architecture group, and Intel Capital head Arvind Sodhani. In a research note, Barclays' CJ Muse points to Intel's history of appointment-from-within as favoring this route.
(Note that a onetime heir-apparent recently left the company: Sean Maloney, EVP and chairman of the company's China group, and former co-GM of Intel's mobility group and its architecture group, stepped down in September of this year. He might be equally well-known, though, for his inspirational comeback from a stroke in Feb. 2010.)
Some think, however, that Otellini's six-month notice might be an indication that an outside candidate is preferred instead of an internally-groomed successor. JoAnne Feeney with Longbow Research is quoted suggesting Intel seeks a more radical shift than just beefing up its mobile arsenal -- it needs to get more explicitly leverage its manufacturing prowess into a business asset, perhaps including a firmer commitment to foundry offerings beyond its current dabblings.
Whomever becomes Otellini's successor, he or she will have "plenty of wood to chop," notes Muse. "While we see no change to Intel's core manufacturing advantage, we think the successor will face many challenges related to Intel's struggle in navigating the declining PC market and difficulties in transition to mobility."
FBR Research's Craig Berger agrees. "Otellini has achieved many successes during his CEO tenure at Intel, and will generally be viewed favorably by history for revenue and earnings growth, and other operational improvements achieved," he writes. "That said, Intel is quite challenged in the mobile arena, with handsets and tablets cannibalizing core PC sales, and with Intel not achieving solid success in handsets or tablets. [...] We believe the board’s mandate for the next CEO will be to effectively create, implement and execute a low power mobile processor strategy intended to suppress the most recent advances of ARM based architecture."