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Originally published November 19, 2012 at 8:00 PM | Page modified November 19, 2012 at 9:04 PM

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Intel CEO Otellini to retire

In a surprise move, Chief Executive Paul Otellini will retire in May, after failing to equip the semiconductor maker for a shift toward mobile devices and away from personal computers.

Bloomberg News

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Intel Chief Executive Paul Otellini will retire in May, in a surprise move three years before mandatory retirement, after failing to equip the world’s largest semiconductor maker for a shift toward mobile devices and away from the personal computers it long dominated.

The board will consider internal and external candidates to replace him, Intel said Monday in a statement. The company has never chosen an outside CEO.

It’s leaning toward executives from within, according to people familiar with the planning who asked not to be named because the search is private.

Under Otellini, 62, Intel has stumbled in the transition to mobile computing, managing to garner less than 1 percent of the market for chips for smartphones and tablets.

Though the company extended its lead over Advanced Micro Devices in PC chips, the industry is shrinking as people do more computing on iPads and Android phones. The PC market this year will post its first annual decline in more than a decade.

“He’s been challenged by a tough PC market,” said Richard Schafer, an analyst at Oppenheimer.

“You’ve got a company that’s heavily dependent on PCs, which is a vertical that’s in structural decline. Intel has yet to really establish a beachhead in mobile computing.”

When Otellini began his tenure as CEO in 2005, desktop and laptop machines powered by Intel’s chips set the standard for personal computing.

More recently, smartphones and tablets have eclipsed the number of PCs being sold, crimping Intel’s revenue.

The company Monday promoted three senior leaders to the position of executive vice president: Stacy Smith, chief financial officer and director of corporate strategy; Brian Krzanich, chief operating officer; and Renee James, head of Intel’s software business.

In past successions, Intel has elevated the current COO to the top job.

Both Otellini and his predecessor, Craig Barrett, stepped up from that position.

Otellini, having served as technical assistant to former CEO Andy Grove, is also the product of Intel’s internal development program to groom future leaders.

“We have excellent internal candidates but will also look outside,” said Chuck Mulloy, an Intel spokesman.

“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,” Otellini said in a statement.

Intel should consider external candidates, including someone with experience changing course at a large company, said Doug Freedman, an analyst at RBC Capital Markets.

“If the board really wants a change, they’ve got to go and get a turnaround guy,” Freedman said.

“That’s difficult for a company the size of Intel. You’d need someone from a big company.”

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