While worthy of the ThinkPad name, mediocre design and a troublesome touchpad...
Thoughts on Otellini’s Legacy, Potential Successor
Paul Otellini, who will retire as CEO of Intel in May, navigated the company successfully through some its greatest challenges but leaves with unfinished business in a consumer technology market that has gone massively mobile in recent years without much input from the chip giant.
“He helped grow the company during the last PC boom and will be known for his strong investments in fabs and semiconductor designs,” said analyst and PCMag contributor Tim Bajarin. “However, he was slow to push their mobile business aggressively, the area with the greatest growth potential. The next CEO will have to navigate Intel through a major change in PC’s and must drive their products to more mobile device wins if Intel is to stay a strong player in semiconductors.”
That assessment of Intel’s outgoing CEO as a sure hand during the PC boom years but slow to position Intel for the more recent explosion of smartphones and tablets was echoed by a number of industry watchers I spoke with upon the news of Otellini’s pending retirement as CEO.
On a side note, it just so happens that Otellini and I graduated from the same San Francisco high school, St. Ignatius, though the 62-year-old Intel boss attended SI a couple of decades before me. That’s really neither here nor there, but our shared high school roots have led me to follow Otellini’s career pretty closely during my tech media career, which kicked off right around the time he took over from Craig Barrett as Intel’s top exec.
Otellini, unlike early Intel leaders like Robert Noyce, Gordon Moore, and Andy Grove, was not an engineer but rose to leadership at the company through its sales and marketing arm. A businessman first and foremost, Otellini was a key figure in convincing Apple to transition its Macs from PowerPC chips to Intel’s x86-based processors around the time he was preparing to take over for Barrett.
He was also at the helm during a period in which Intel engaged in some dubious business tactics to neutralize long-time rival Advanced Micro Devices. In the early part of the last decade, AMD was sitting pretty with the introduction of its Opteron and Athlon line of 64-bit processors and then beat Intel to the punch with the release of the first dual-core chips for PCs.
Otellini oversaw a legitimate technological response to AMD’s market share-grabbing success, namely the introduction of Intel’s now-famous “tick-tock” schedule of alternating process technology improvements with microarchitecture redesigns every other year. But it was also during this period that Intel was cited and later punished by anti-trust regulators in Europe and elsewhere for using anti-competitive means to keep AMD’s sales to top computer makers artificially low.
Intel wound up paying record fines following a series of lawsuits and anti-trust probes around the globe. But during the Otellini era, the chip giant also saw its relentless pursuit of Moore’s Law and its commitment to x86 innovation pay off in spades as Intel “pulled way ahead of its nearest rival AMD in PC and server chips,” in the words of J. Gold Associates lead analyst Jack Gold.
Otellini’s Mobile Problem Other Intel watchers like Pat Moorhead of Moor Insights & Strategy and Sterne Agee’s Vijay Rakesh similarly tipped their caps to Otellini for his eight-year run as the head of the world’s biggest chip maker, while voicing concerns about Intel’s halting steps into mobile and the as-yet-underwhelming performance of ultrabooks, a heavy Intel investment in the past couple of years.
“Otellini will be best known for leading Intel out of the AMD 64-bit challenge and legal attack. Core architecture generated incredible profits and he was able to invest that into mobility, security, and storage assets that could payoff big in the future,” Moorhead said. But the analyst also warned that the jury was still out on Intel’s prospects in the mobile device space.
“After two failed mobility attempts, Intel has competitive products that they must now convert into real profits,” he said.
Rakesh called ultrabooks “a laggard” as high platform costs relative to a rush of new tablets on the market and “weak initial consumer response” to Microsoft’s Windows 8 have conspired to lower his near-term expectations for the fast-booting, thin-and-light laptop category in which Intel has invested so much.
Gold, too, described Intel as a company at a crossroads in terms of consumer computing trends as Otellini prepares to make way for a successor.
“The market has changed over the past couple of years, and although the traditional x86 market is certainly not going away anytime soon, the increased emphasis on the mobile market means the ARM camp has made substantial inroads in terms of chip volumes and market share. Intel has tried to counter this move over the past few years with Atom, which has yet to gain much traction,” he said.
Who’s Next in Line? And what of Otellini’s successor? Intel has only had five CEOs in its 44-year history, so it’s difficult to try to discern any trends in how the company approaches these sort of leadership transitionsthey just don’t happen that often at Intel.
What we can say is that all of Intel’s CEOs were promoted from within the company and all have been men, though it appears there’s a decent chance one of those two traditions could change come May. Noyce, who served as CEO from 1968–1975, and Moore (1975-1987) were co-founders of the company. Grove (1987-1998) came in on the ground floor as well, while both Barrett (1998-2005) and Otellini joined in the early 1970s.
“I doubt they will go outside. Intel is big on promoting from within and there are several who could fill Otellini’s shoes in your list,” Gold said in response to my sending him several names from Intel’s executive bio page, including Renée James, David “Dadi” Perlmutter, Stacy Smith, Thomas Kilroy, Diane Bryant, and Kirk Skaugen.
Indeed, the field appears to be wide open just a few years after the race to replace Otellini seemed a lot tighter than it is now.
Back then, former Intel exec Pat Gelsinger and current head of its China business Sean Maloney were considered very viable heirs apparent to Otellini. But Gelsinger jumped ship for EMC and is now CEO of VMware. Maloney suffered a stroke in 2010, and though he’s thrown himself into his recovery with pretty amazing results, has already said he’ll retire in January.
“They may go with a Dadi, or perhaps a Justin Rattnersomeone who has been there a long time and who has shown a good deal of success. Certainly none of the others on your list are out of the question either,” Gold said. “Of course the negative on Dadi is that he’s not an American so his native language skills are a bit weaker than the others. But that should not work against him in my opinion. And he runs probably the biggest group within Intel.
“Renée also has a pretty large organization under her, especially with the McAfee acquisition, and services and software is a growth area. She’s done pretty well with that. And Tom Kilroy has been there for some time as well and done good work. I would have bet on Sean Maloney last year, but of course he unfortunately got sick and retired. It may boil down to who has worked the most with the board and has relationships with them.”
By Damon Poeter, PCMag