Intel to seek new CEO, Otellini to retire in May

Posted at 11/20/12 8:49 AM

NEW YORK - Intel Corp. announced Monday that chief executive Paul Otellini would retire in May, opening the door to new leadership as the semiconductor giant shifts its focus to mobile devices.

The announcement of the departure of Otellini, 62, came as a surprise, and analysts said it could help the world's biggest chipmaker navigate a new tech landscape.

"I don't think anyone expected Otellini to retire until he hit 65. This is a few years early and takes everyone by surprise," said Jeff Kagan, an independent technology analyst and consultant.

"Fresh leadership is what Intel is in the market for right now... Intel is a strong company, but it is also struggling to expand beyond computer chips. Their move into mobile has not been a rousing success."

Intel remains the dominant chipmaker in the PC market but has been catching up in the field of mobile devices including smartphones and tablets.

The semiconductor maker said last month third quarter profits fell 14 percent from the same period a year ago to $2.97 billion on revenues of $13.5 billion, down five percent, and cited "a continuing tough economic environment."

Intel said its board of directors "will consider internal and external candidates" for Otellini's replacement.

Trip Chowdhry, an analyst with Global Equities research, said the change was "a welcome move" and that Intel should look to an outside candidate.

"An outsider replacement would make sense because if it's someone internal, it will be more of the same," Chowdhry said.

"That is not what Intel needs right now. Otellini did a good job, but he may not be the right person to move the company to the next stage."

The company said that since Otellini took over as CEO in 2005, it generated cash from operations of $107 billion and annual revenue grew from $38.8 billion to $54 billion.

But the chipmaker has been hit recently by a shift away from traditional PCs to mobile devices, and by a sluggish global economy. Rival Qualcomm, which specializes in mobile chips, recently overtook Intel in market value.

And Intel's big push for "ultrabooks," the thin PCs which are competing with tablets, has been a major disappointment.

Doug Freedman at RBC Capital Markets said the shakeup "could be welcome news to investors as Intel could be in greater position to broaden its portfolio into higher growth markets."

Freedman said Intel "could be better-served choosing a successor with a product/sales focus" instead of a technical background "to broaden and deepen customer relationships."

Intel said Otellini's decision to retire "will bring to a close a remarkable career of nearly 40 years of continuous service to the company and its stockholders."

"Paul Otellini has been a very strong leader, only the fifth CEO in the company's great 45-year history, and one who has managed the company through challenging times and market transitions," said Andy Bryant, chairman of the board, in a statement announcing Otellini's plans.

"The board is grateful for his innumerable contributions to the company and his distinguished tenure as CEO over the last eight years."

Intel also said the board has approved the promotion of three senior leaders to the position of executive vice president: Renee James, head of Intel's software business; Brian Krzanich, chief operating officer and head of worldwide manufacturing; and Stacy Smith, chief financial officer and director of corporate strategy.

Intel shares edged up 0.12 percent to $20.22 in midday trade.

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