Business, Enterprise

Intel CEO Paul Otellini to Retire in May 2013

We received a news alert from Intel Investor Relations with a somewhat unexpected announcement: Paul Otellini, current CEO of Intel and member of Board of Directors at Google, will retire from Intel in May 2013. This announcement comes after Paul led the company for eight years, during which Intel’s quarterly earnings beat Intel’s annual earnings (from $10B a year to becoming a $50B+ year company), and established manufacturing and product dominance in the PC supply chain.

Intel’s internal policy was to never have a CEO older than 65 years of age. In Paul’s case, the retirement will come at 62 years of age, 39 years after joining the company (since 1974). According to our sources close to heart of the matter, this retirement doesn’t come as planned, since the Board of Directors feel Intel needs to become more serious player in the mobile market, given its future manufacturing commitments.

In talks with the Intel insiders, we learned that the company needs to command 60% of the worldwide mobile market (if the PC industry contracts) – in order to meet the manufacturing commitments (according to our sources, Intel has around $30-35 billion committed to building Fabs on 14nm and 10nm processes). Naturally, we consider the idea of Intel contracting or going away as realistic as the plot from Armageddon movie starring Bruce Willis. Intel is a benchmark in semiconductor industry, even though they’ve been steadily prolonging the roadmaps (both on the processor and on the manufacturing node side).

Furthermore, there’s a shift in generations at Intel, as so called Intel boomers (1st gen and 2nd gen employees) are retiring from the company. This is bringing a whole new line of younger executives into previously unthinkable positions, such as junior management being able to fire the older executive should his or her actions prove damaging for the company. This new wave is one of key reasons why Intel turned internal management on the head and become an executing machine on all fronts.

The board now has enough time to name the successor and it will be interesting to see will the next CEO come from technical or marketing side of business. In case you were not aware of this, Intel has two distinct lines of leadership: technical and marketing/sales. There are numerous other departments, such as the TS department (infamous "Bean counters" which decide on actual products). Paul Otellini was the first executive from the marketing side of the company that got promoted to the helm, shunning Patrick Pat Gelsinger (technical side). Technical side of the company also got hit when Sean Maloney, primed to be the next CEO of Intel suffered a career-ending stroke, which saw him spending his last year in Intel as the head of Intel China.

The question beckons: Who will be the Next CEO of Intel? It is almost certain it will be inside talent, as the Stephen Elop Effect (extension of the Osborne Effect) is not something the company would like to repeat in case of mighty Chipzilla from Santa Clara.