Intel promotes insider to succeed Otellini as CEO

Former COO Brian Krzanich faces a declining PC market that had formed the engine of its growth

Intel today named its COO Brian Krzanich as its next CEO, succeeding Paul Otellini, who will officially hand over the reins of the chip giant at the company's annual stockholders' meeting on May 16. Otellini announced Nov. 20 last year that he would retire in May after four decades with the company, of which eight years were as the company's CEO.

Krzanich, who has worked as COO up until now, beat other internal candidates being considered for the post, according to industry insiders. They included Stacy Smith, Intel's CFO, and Renee James, general manager of software and services. The board of directors also elected James, 48, to be president of Intel. She will also assume her new role on May 16.

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All three were promoted to senior vice president on Nov. 20, the same day Otellini's retirement was announced.

Recent CEOs at Intel were appointed at the time of directional changes for the company. Krzanich's appointment as Intel's core business of laptop and desktop chips has struggled with the slowdown in the PC market. He will have the task of maintaining Intel's top spot in the slumping PC market while trying to dislodge ARM from the fast-growing mobile market.

Intel's processors are used in just a handful of mobile phones and tablets, and 52-year-old Krzanich will have to a get device makers to adopt the company's mobile Atom processors. Intel has poured millions of dollars into smartphone and tablet chip development as it tries to take market share away from ARM, whose processors are used in most tablets and smartphones.

It will also be up to the new CEO to fix a faltering strategy around Ultrabooks, which Intel is pushing as a new category of thin-and-light laptops with tablet features. Ultrabooks were introduced to reinvigorate the PC market, but product sales have been slow.

Analysts have also pointed out that Intel could focus more on a foundry strategy and expand operations for making chips for third parties. Intel's fabrication plants are considered more advanced compared to those of rivals GlobalFoundries, Samsung, and TSMC (Taiwan Semiconductor Manufacturing Co.). Intel has historically used its manufacturing assets to make chips for itself, but it has recently opened up to the idea of becoming a contract manufacturer. Intel makes chips -- mainly high-margin FPGAs -- on a limited basis for third parties such as Altera, Tabula, and Achronix.

Otellini became Intel CEO in 2005 just as the company was struggling to keep up with chip development and losing processor market share to rival Advanced Micro Devices. Otellini put in place the famous "tick-tock" strategy that brought out updates to chips on a yearly basis. That stabilized product releases, development, and chip manufacturing cycles. In addition to winning back market share, Otellini played a key role in Apple's shift from IBM's and Motorola's PowerPC processors to Intel's x86 chips on Macs in 2005.

Otellini also guided Intel through multiple antitrust cases and expanded product offerings through acquisitions of companies such as Wind River and McAfee. Intel also acquired networking firm Fulcrum, and assets from Qlogic and Cray, with which the company is expanding its data center offerings. Intel also bought wireless assets from Infineon which are expected to be integrated into smartphone and tablet processors.

But for all his achievements, Otellini's reign had its rough times. He failed to quickly adapt to the fast-growing mobile market, and had to belatedly accelerate the development of the Atom chips. Otellini was also a champion of Ultrabooks, which have so far failed in the market.

Agam Shah covers PCs, tablets, servers, chips, and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com.

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