Intel CEO Otellini Hints At Internal Successor

Intel will likely hire a new CEO from within its own ranks, at least according to outgoing CEO Paul Otellini.

Otellini surprised Intel’s board of directors 19 November when he announced that he would retire in May 2013, ending a career of more than 40 years with the company, the last eight as the CEO. The move also kicked up a lot of speculation over who would replace Otellini at Intel, which is still dominant in the server and PC chip markets but is trying to make inroads into the fast-growing mobile device space.

Same Strategy

If Otellini is correct, his successor already works at Intel, making a drastic change in direction for the company unlikely.

Speaking 5 December at a Sanford C. Bernstein conference, the 62-year-old Otellini said the final decision lies with Intel’s board of directors, but that his sense is that the director will choose an inside candidate rather than bringing in someone from outside who would need significant time getting to know the company, its culture and its employees.

“It’s not up to me, but I think that’s the most likely outcome,” Otellini said, according to a report in Reuters. “I’m very comfortable with the internal candidates. … In this environment, why take the risk and take the time [of hiring an outside executive]? So my sense is that they will stay inside.”

The same day that Otellini’s retirement was announced, Intel also announced that three executives – Renee James, who oversees the company’s software business; Brian Krzanich, chief operating officer and head of worldwide manufacturing; and Chief Financial Officer and Director of Corporate Strategy Stacy Smith – were being promoted to the position of executive vice president, a move that installed them as among the front runners to replace Otellini.

Intel officials, when announcing Otellini’s decision to retire, touted numerous financial and strategic accomplishments during his tenure in the top job, from generating $107 billion (£67 billion) in cash from operations and driving up the power efficiencies in Intel’s chips to creating the Ultrabook segment of the PC market, expanding the company’s efforts in security, software and mobile communications, and driving such technological achievements in processors as High-K/Metal gates and the 3D Tri-Gate transistor architecture.

Mobile Charge

Intel’s larger challenge now is gaining traction in the mobile-device chip space with its x86 architecture, particularly among the increasingly popular smartphones and tablets. Currently the bulk of these devices run on low-power chips designed by ARM Holdings and made by the likes of Samsung Electronics, Qualcomm and Nvidia. Intel is looking to its low-power Atom architecture and some of its Core chips – as well as Microsoft’s new Windows 8 operating system – to chip away at ARM’s dominance, and already has some smartphones and tablets running on its chips.

However, it’s still uncertain how Intel will fare in the highly competitive market, though its importance to Intel is clear. Intel – like rival chip maker Advanced Micro Devices and such systems OEMs as Dell and Hewlett-Packard – has been impacted by declining sales of PCs, a trend being fuelled by the rising popularity of smartphones and tablets and the ongoing uncertain global economy.

In October, Intel executives announced that both net income and revenue declined in the third quarter over the same period in 2011 due in large part to slowing PC sales. Analysts with IDC and Gartner announced in September that third-quarter PC sales dropped between 8 and 9 percent.

Despite those numbers, Otellini said 5 December that he didn’t expect that Intel would take a drastically different course after he steps down next spring.

“I don’t expect our strategy to change,” Otellini said yesterday. “I think the board is very comfortable with the strategy and assuming we stay inside [with finding the new CEO], I think the management team is as well.”

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Originally published on eWeek.