Intel Corporation Hoped Otellini Would Stay Another Year As CEO

Intel Corporation Hoped Otellini Would Stay Another Year As CEO
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Intel Corporation Hoped Otellini Would Stay Another Year As CEO

Andy Bryant, chairman of the board of Intel Corporation (NASDAQ:INTC) hoped Paul Otellini could stay one more year as chief executive officer (CEO) of the company. During an Interview with Barron’s yesterday, Bryant admitted that he was surprised last week when Otellini  told him that he will retire by May next year.

“”I did everything I can think of to buy myself another year [of Otellini’s leaderhip]. We were targeting further out for this,” said Bryant.

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Paul Otelli has been serving Intel Corporation (NASDAQ:INTC) for almost 40 years. In a press statement yesterday, Bryant noted Otellini’s innumerable contributions and strong leadership in managing the company through challenging times and market transitions.

On the other hand, Otellini said, “I’ve been privileged to lead one of the world’s greatest companies.” According to him, it is time for him to move on and pass the mantle to a new generation of leadership after serving the company for almost four decades. He said would be available as an adviser to the management, after retiring as head of the company.

Intel Corporation (NASDAQ:INTC) enumerated some of the significant achievements of Otellini during his tenure as CEO of the company, including the launching of the ultrabook, the development of processors for mobile devices such as smartphones and tablets, enhancing the energy efficiency of Intel chips, increasing the network for cloud-based computing for Intel products and expanding Intel Corporation (NASDAQ:INTC)’s acquisitions and business partnerships.

During the interview with Barron’s, Bryant said the mobile market is still a big challenge for the company. According to him,”After almost 40 years at Intel, and the Intel CEO job for 8 years, which is a really hard job, he felt it was time to move to the next generation of leadership. We do have big issues in front of us, moving to the tablet and phone markets, and he was ready to let the next generation lead those battles.”

In addition, Braynt expressed confidence that Intel Corporation (NASDAQ:INTC) is ahead of its competitors in terms of manufacturing ultrabooks and chips for smartphones and tablets. According to him, Intel needs to utilize its technical strength to boost its presence in the mobile market.

Bryant said, “I would expect Samsung and others to continue to make progress, and you never assume people you are competing with will stop the technological advance. But we expect to take advantage of the increasing gap in technology we’ve established.”

According to him, finding a replacement for Otellini is another challenge. Intel will search for the next CEO inside and outside the company. He is considering five senior executives as candidates for the position, including Renee James, the head of software; Brian Krzanich, head of manufacturing; Stacy Smith, chief financial officer; Dadi Perlmutter, head of mobile efforts; and Arvind Sodhani, president of Intel Capital.

Ambrish Srivastava, PhD, an analyst at BMO, said it is interesting to know that Intel is willing to hire a CEO outside the company, since the company has a deep rooted internal culture, few came from outside and succeeded.

On a related note, Morgan Stanley believes  that changes could be in the works. Possibilities they have heard from investors include:

• Intel could spend significantly less on capital without sacrificing any of the strategic objectives, significantly boosting its free cash flow and dividend.

• Some  think Intel should take an ARM license to accelerate mobility. We do not think this moves the needle –100 million ARM units at $25 would be roughly 4% of 2012 revenues, and about 3% of gross profits. While certainly Intel’s tablet / smartphone efforts have not been successful thus far, there are no easy answers when it comes to adding to and replacing $35bn x86 gross profits when x86 stops growing.

• Accelerating a single customer foundry relationship, which has already been contemplated by Intel.

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