Intel (Nasdaq: INTC) CEO Otellini: Leaving While the Leaving is Good

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Intel Corp. (Nasdaq: INTC) CEO Paul Otellini made a surprise announcement of his retirement from the firm yesterday (Monday).

Otellini, who has worked for Intel for forty years and has been CEO for the past eight years, said in a statement that "...it's time to move on and transfer Intel's helm to a new generation of leadership."

Opinion has been divided over Otellini's tenure as Intel's CEO. While he has increased revenue and dividends, Intel's share price has risen by only about 1% annually.

Intel has clearly missed the boat on making mobile devices.

Gus Richard, who covers Intel for Piper Jaffray, wrote, "As the PC market has stagnated, Intel has tried to pivot to mobile and increasingly to foundry. However, Intel has had very limited success in mobile and Intel's prices for foundry wafers are 3x that of TSMC's [Taiwan Semiconductor (NYSE ADR: TSM)]."

Richard, who has a "Neutral" rating on Intel shares, continued, "The new CEO will also have numerous internal conflicts to resolve while moving the company forward. Although Otellini's departure is billed as a retirement, in many cases it is not a positive sign when a CEO leaves."

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The Next Intel CEO (Nasdaq: INTC)

Contrary to Intel's standard practice, the company does not have a carefully groomed, internal candidate for CEO lined up. In fact, the company issued a statement saying that it "will consider internal and external candidates" to replace Otellini.

Despite the fact that three senior Intel executives who might be considered to replace Otellini were promoted to executive vice president today, many analysts and industry observers think the company needs to "reboot" and bring the new CEO in from outside.

It seems as if Intel's cozy relationship with Microsoft Corp. (Nasdaq: MSFT) has prevented the company form reacting to the rapid rise of mobile computing. Rivals including Qualcom (Nasdaq: QCOM) and ARM Holdings plc (Nasdaq: ARMH) have carved out dominant shares in the mobile device market while Intel's market share languishes.

"Our comfort zone for so many years was Intel chips and Microsoft software and we knew what we had to do," Otellini said in an interview with Fortune last January. "We built our chips to a certain specification and Microsoft did their software and we worked together and, voila, new PCs would come out from 100 vendors a year and everything would just kind of work together. It's different in the phone space."

Speculation has mounted that Otellini is being pushed aside-in the nicest possible way, of course. Clearly, Intel is a force to be reckoned with, boasting world class engineers and state-of-the-art manufacturing facilities. But it may take someone who is not steeped in Intel's Microsoft-based PC culture to take what is good about Intel and apply it to the mobile device market.

Intel could then begin to anticipate the market instead of simply react to it and belatedly at that.

In the meantime, Otellini can collect his gold watch and cash in his stock options. He seems to be getting out while the getting is still good.

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