TechWeekEurope’s Crystal Balls: Who Will Fill Paul Otellini’s Intel Boots?

When Intel CEO Paul Otellini announced his pending retirement in November, it caused a stir. Though Intel’s stock was not doing so well, CEOs normally get a couple of bad quarters before they are pushed out. But was he pushed out of the world’s leading chip company, and who will replace him?

Intel’s revenues declined by 2.7 percent in 2012, but it has retained its number one position in the chip world. Although other vendors say the giant needs a new business model, it is a surprise if the Intel board is so worried it would change its CEO this abruptly. However, the 62-year-old had been expected to stay a couple more years, and a surprise departure does look very much like it may have been involuntary.

Paul Otellini’s legacy

His departure was announced after a particularly bad quarter – sales down 5.5 percent and net revenue down 14 percent. Normally, this kind of thing would make a CEO feel shaky, but most would get another couple of quarters to try and improve things.

In Otellini’s case, he ran the company for eight years, and has been an employee at Intel for 40 in total. Ditching him (if that is what happened) suggests a fairly deep dissatisfaction with how things are progressing.

What could Intel be disappointed about? Well, the root cause of its decline is the fall in PC sales, and Intel’s failure to get its processors established in portable devices, including phones and tablets.

Smartphones now outsell PCs, and they virtually all use processors other than Intel’s. Most are based on designs using ARM cores.

Intel has attempted to establish the Atom processor range designed for low power usage in mobile devices, but has so far had little success. Phones such as the Orange San Diego exist, but they are rarities.

As if to underline the threat, low-power chips look like changing the way big data centres operate, with ARM processors angling to take them over with commodity hardware.  Again, Intel’s answer is Atom, but it is taking time to get the processor ramped up for this role.

Meanwhile, it’s easy to see discontent among strong Intel customers. Microsoft is bidding to establish ARM chips as an alternative platform for Windows systems (using Windows RT Surface tablets) and rumours have emerged that Apple is contemplating moving its Macintosh line from Intel to ARM-based chips.

What can Intel do differently?

If Intel really is rejecting Otellini’s answers to this issue, what can it do differently?  The company’s approach is based on a close integration of its silicon manufacturing plants (“fabs”) with its design teams. ARM, by contrast, produces designs which can be configured and made by any number of third parties. In ARM’s view, that has allowed it to get up and running quickly with a variety of designs, while Intel’s monolithic approach has limited it.

Among the endorsements of ARM, Intel’s long-term rival AMD has opted for ARM designs – admittedly from a position where it is losing the battle with Intel in the data centre.

But how would things look if Intel made a radical shift and adopted ARM’s model? It would have to split its design business from its fabs. The design team would deliberately work to create chips that could be fabricated in multiple places, and Intel’s factories – the most advanced wafer plants in the world – would be open to working with other designs including ARM’s.

Intel would lose something here. Everyone acknowledges that the close tie between its design and manufacturing allows it to push boundaries that no one else is. Intel is leading the charge to 22nm fabrication, and its processor designs make use of the tolerances in its manufacturing.

However, it could benefit if PCs slow down and demand falls for Intel chips, then its fabs could push ahead with alternative designs from other sources. And its design teams would get the benefits that ARM claims from an ecosystem of players using cores for different purposes beyond what the original designers expected.

Business or technology?

The key choices are between a business head or a technology brain, and between an internal and external candidate.

Paul Otellini has suggested that Intel will favour an internal candidate. Intel has promoted three executives to vice presidential roles, all of whom are now seen as possible CEOs-in-waiting. Renee James oversees the company’s software business and is the design team’s candidate; Brian Krzanich, chief operating officer and head of worldwide manufacturing represents the fabs; while chief financial officer and director of corporate strategy Stacy Smith is the business head.

Of the three, who would be most likely to cut the company up? Or is the idea too fanciful?

Whatever the answer, there is one other internal candidate that would be a very left-field choice. Will.i.am, front man of the Black Eyed Peas, has become “director of creative innovation” at Intel. There is absolutely zero chance of his ascending to Otellini’s chair, and if we are honest, we don’t really think it would be a good idea because actually, he is a bit of celebrity bling – his job is to open up Ultrabooks and make them look as cool as Macbooks.

But what about it? Please tell us, Intel, that you are at least considering the possibility along with serious candidates.

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