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UPHEAVAL as Otellini retires: Will Intel look inside?

Chipzilla chieftain's surprise exit

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Shares in chipmaker Intel were halted before Wall Street opened up for business on Monday as the company announced that its president and CEO, Paul Otellini, 62, will step down from those roles in May of next year.

Otellini has been at Intel since 1974, and rose through the ranks to eventually run its PC and then server microprocessor business units. In 2002 he became president and chief operating officer under Craig Barrett, who became Intel's chairman of the board in 2005. Barrett and Otellini joined Intel the same year, and Barrett blazed the same trail through the company that Otellini eventually took, becoming COO in 1993, president in 1997, and CEO in 1998. Andy Bryant has been Intel's chairman only since May of this year, and it seems unlikely that Otellini will replace him unless Bryant himself is retiring.

Intel did not discuss Otellini's or Bryant's plans in its statement, but Otellini said it was time for a new leader at Intel.

"I've been privileged to lead one of the world's greatest companies," Otellini said. "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. I look forward to working with Andy, the board, and the management team during the six-month transition period, and to being available as an advisor to management after retiring as CEO."

So apparently Otellini either did not want to be chairman of the board or was not offered the position, and given the fact that Bryant was groomed for the job over the past several years, it seems likely that Otellini has not wanted to be chairman for a while.

Intel said in its statement that the board would be looking at a pool of successors from within Chipzilla and also outside its own walls to find a successor to Otellini as president and CEO. Wouldn't it be funny if Intel offered the job to Pat Gelsinger, who left Intel to run EMC's storage business and who has just this summer become CEO at VMware? Presumably Gelsinger was on the inside track for the CEO job at some point, and then wasn't and that was why he left in the first place.

In addition to announcing Otellini's retirement, Intel also promoted three of its senior people to executive vice president positions: Renee James, head of Intel's Software and Services Group; Brian Krzanich, chief operating officer and head of worldwide manufacturing; and Stacy Smith, chief financial officer and director of corporate strategy. A betting man might guess that Krzanich is in the front running for the president and possibly CEO position.

Dadi Perlmutter was named an executive vice president and put in charge of the Intel Architecture Group - which controls mobile, PC and server chip design and manufacturing - during the management shuffle back in January that made Bryant chairman. Perlmutter is also very likely in the running for the president or CEO jobs.

Depending on how Intel wants to play it, it could split the two jobs apart again and make clear the succession line for years to come, with the president eventually becoming the CEO. It seems unlikely that James or Smith are in the running for the top jobs, but Intel does not want to lose them to competitors, either, and hence the promotions.

During Otellini's eight-year tenure as CEO, Intel's revenues grew by 39.1 per cent to $54bn and its earnings per share rocketed up by 70.7 per cent to $2.39. There was that whole mess of the Great Recession towards the end there that made a mess of Intel's numbers, but the Great Recession made a mess of all of our numbers.

It was not clear when Otellini had planned to retire, but the onslaught of ARM-based processors, the not-so-enthusiastic adoption of Ultrabook designs by consumers, and the tough job Intel has of breaking into the smartphone and tablet markets might have given the board a reason to shift gears and change up its executive ranks to better meet these challenges. Intel may have the chip manufacturing lead, but that is not necessarily going to be enough. ®

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