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Even though Intel Corp.’s mandatory retirement age for chief executive officer is 65 years and Paul Otellini is just 62 years old, he still decided to proceed with the retirement next year. Financial analysts believe that the chief executive officer was forced to do so as the board of directors was unhappy with the company’s slow progress on the market of ultra-mobile electronics, including smartphones and tablets.

“[The] eventual departure [of Paul Otellini] is more likely a sign that Intel’s focus could increasingly shift outside of the traditional PC market. While Otellini has done a commendable job as CEO for the past 7 years, growing revenues at a 5% CAGR to our expected $53.5 billion in 2012, the company is feeling the pressure of 1) headwinds in its core PC market and 2) being unable to capturea sizable portion of the mobile SoC market (dominated by ARM) after ~5 years of development efforts. Thus a shift in leadership could be welcome news to investors as Intel could be in greater position to broaden its portfolio into higher growth markets. In our view, we believe the company could be better-served choosing a successor with a product/sales focus in-order to broaden and deepen customer relationships vs. a candidate with a technical/manufacturing focus,” Doug Freedman, an analyst with RBC Capital wrote in a note for clients, reports Forbes.

It is interesting to note that the decision of Mr. Otellini to retire was a surprise even for the chairman of the company, Andy Bryant, according to the Tech Trader Daily blog. The chairman himself believes that current challenges Intel faces with its ultra-mobile offerings can be addressed by advances in process technology, especially keeping in mind the fact that Intel is already the world's leading manufacturer of semiconductors.

“He and I talked a lot about this in past. 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. I did everything I can think of to buy myself another year [of Otellini's leaderhip]. We were targeting further out for this. He surprised me last week when he said this,” said Mr. Bryant.

Even though it is hard to argue that Intel is facing problems with popularization of its products for ultra-mobile market, one thing that needs to be noted is that the company executes its roadmaps flawlessly and the problem for the company may not be the quality of products, but other factors, such as their prices or Intel’s traditional business approaches.

“We suspect that times are changing given the emergence of a near-viral architecture from UK-based ARM Holdings. This has been boosted by the rise of all things Apple (uses ARM in its mobile products), and has led to a diminishing importance in the Intel x86 instruction set. Building massive $10 billion dollar fabs just won’t cut it for Intel in our opinion, as had been so effective back in the day when AMD was the company’s sole mainstream competitor […] our bet is that Intel goes outside for its new CEO and a search that will not be trivial,” said Hans Mosesmann, an analyst with Raymond James.

While partly irrelevant or inefficient leadership is not very positive for Intel, the lack of a leader can be much worse than that. Moreover, a chief exec from outside of Intel may not be the best candidate as he will not share the corporate culture of the world’s largest chipmaker.

Tags: Intel, Business

Discussion

Comments currently: 17
Discussion started: 11/20/12 06:57:08 AM
Latest comment: 12/19/12 06:30:51 PM
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1. 
Intel is going downtown. Shares will drop 20%-30% by 2013Q2. Failed to adjust to post PC era and affected by recession. The same problems as faced by AMD but Intel is not as nimble in coming to terms with industry changes. Haswell will not save them because consumers are not moved by Windows 8 and are bored by benchmarks. Job cuts are coming in 2013. Mr. Otellini didn't want his legacy tainted so abandoned ship. Next CEO appointed gets the dirty work.
6 0 [Posted by: linuxlowdown  | Date: 11/20/12 07:07:38 AM]
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Unfortunately, the changing consumer trends are negatively affecting the PC enthusiast market.

The importance of high-end x86 CPUs is coming to an end outside of niche markets (workstations, gamers and professionals). As more and more consumers shift towards smartphones and tablets and away from desktops and laptops, it will become less important and less profitable to spend R&D on these cutting edge CPUs, in turn negatively affecting our hobby.

It's similar to many modern videogames - the industry will eventually follow what the masses want. If Intel is to take it seriously, it would need to rethink how a CPU is built and spend considerably more resources on making a real smartphone competitor. If the PC market suffers even more, Intel won't be able to sustain $10B expenditures on fabs as it has done in the past.
5 2 [Posted by: BestJinjo  | Date: 11/20/12 11:06:14 AM]
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I agree as usual BestJinjo. I reckon that in the future, enthusiasts may have to buy server products for their power computing needs. And we'll pay through the nose for the privilege because this market is so much smaller and the R&D must be recouped. By this time though, we'll probably look like dinosaurs to the next generations, wanting to do "real" computing work by a command line whilst keeping our legs warm. It'll be a sad day. But every generation has felt it and thought that not all change is good.
4 1 [Posted by: linuxlowdown  | Date: 11/21/12 03:07:48 AM]
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2. 
Where are you today trolls? Read this then ask yourselves whilst blushing from embarrassment in the mirror - "oh damn, have I been trolling like a goose against AMD's plans and now my favourite pin-up company is going to have to follow suite? AMD were really right all along and I have been shown up as not understanding the industry".

Quote: "Doug Freedman, an analyst at RBC believes that Otellini’s retirement is yet another challenge Intel Corporation has to fight through in the near-term. However, his eventual departure is more likely a sign that Intel Corporation’s focus could increasingly shift outside of the traditional PC market.

While Otellini has done a commendable job as CEO for the past 7 years, growing revenues at a 5% CAGR to their expected $53.5bil in 2012, the company is feeling the pressure of 1) headwinds in its core PC market and 2) being unable to capture a sizable portion of the mobile SoC market (dominated by ARM) after ~5 years of development efforts. Thus a shift in leadership could be welcome news to investors as Intel could be in greater position to broaden its portfolio into higher growth markets. He believes that the company could be better-served choosing a successor with a product/sales focus in-order to broaden and deepen customer relationships (like Rory Read at AMD) vs. a candidate with a technical/manufacturing focus"

ww.valuewalk.com/2012/11/intel-corporation-ceo-resigns-analysts-react/

Intel shares now heading towards $18 fast.


6 1 [Posted by: linuxlowdown  | Date: 11/20/12 08:03:55 AM]
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3. 
Intel keeps shooting itself in the foot by using x86 in markets where it just doesn't work. I would have fired Otellini for that approach.

x86 is a miserable instruction set, a real PoS. It was even considered bad when it came out. It's needed for compatibility in the PC market, but it's of minimal benefit in the phone and/or tablet market. But the price of entry is higher, because all that wasted energy needed for the ugly decoding puts it at a disadvantage against ARM.

Without that, Intel would bury ARM. They are the best manufacturer, have huge software resources to promote adoption, and can build an infrastructure around every product they create. Why throw it all away with x86?

Fire Otellini. He's failed in this most important decision. If not for that, Intel would be a very strong player in that market, instead of struggling trying to shoe-horn an inefficient instruction set into a market that requires efficiency.
0 1 [Posted by: TA152H  | Date: 11/20/12 12:03:33 PM]
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4. 
Get him AMD, and send away Rori moron...
0 0 [Posted by: Cosmos  | Date: 11/20/12 09:30:04 PM]
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5. 
Trying to force atom SOC down ppl's throats for the past 4 or five years has not really worked out for Intel, if it wasn't for Intels advanced fabs atom would be far worse off than it is now

Maybe Intel should be looking @ a different arch to address the mobile market though I cant see that happening after the billions spent on development and practically paying ppl the use it in smartphones
0 2 [Posted by: alpha0ne  | Date: 11/20/12 11:11:25 PM]
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6. 
The "analysts" are clueless as usual. Intel is losing in the mobile space right now because they're not trying, not because they can't win.

Consider Medfield, their current phone/tablet offering: It uses a 4-year-old architecture (Bonnell Atom) on an obsolescent process (32 nm). It's designed that way because Intel can keep their architects/designers busy and their leading edge 22 nm fabs running at capacity with much higher-margin parts like Ivy Bridge. In other words, mobile historically hasn't offered sufficient return on investment to justify their attention. When that changes you can be assured that Intel will put serious engineering effort behind their mobile parts, and allocate capacity from their leading-edge fabs.

I suspect that the changeover in engineering investment has already happened (you can see evidence of it both in how Haswell was designed, and in the rumors about the upcoming Saltwell microarchitecture). I expect that they'll start allocating leading-edge fab capacity to mobile some time next year, and then the fight will be on "for real".

As to the argument that x86 is "too ugly" to survive: We've heard that more than once over the last 30 years. That argument was wrong every time been raised before and it's wrong now. The overhead for x86 decode is significant for simple in-order single- or dual-issue designs. History has proven beyond argument that it becomes negligible for complex OoO engines like A15, Krait, or SB/IB/Haswell. The mobile market is moving in a direction that makes x86 more competitive, not less.

Also, keep in mind that Intel has an ARM architecture license and has designed and built ARM processors for mobile/embedded applications in the past (StrongARM/Xscale) when the performance requirements were lower and x86 was therefore an impossible fit (see preceding paragraph). Intel is first and foremost a fab house. The fact that their processes are better than anybody else's has always been their principal competitive advantage (and is today - their 22 nm tri-gate process is well ahead of anything else in the industry). Architecture is just a way of keeping those leading-edge fabs busy making high-margin parts. If they needed to go to ARM to do that then they could and would. I doubt that will be the case for the reasons cited above, though.

The argument that "Building massive $10 billion dollar fabs just won’t cut it for Intel" is spectacularly clueless. Provided their process technologies stay ahead of Global/TSMC/UMC, that's actually the best possible investment Intel can make. Everything else (including whether the parts they fab on those leading-edge processes are x86, ARM, FPGAs, or something completely different) is secondary. As I alluded above Intel could arguably benefit by doing the opposite: Double down on process tech and fabs, and de-emphasize architecture.
0 0 [Posted by: patrickjchase  | Date: 11/21/12 12:55:54 PM]
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7. 
Maybe Roy will join Intel once he is finished at AMD., and got it onto another track?
2 2 [Posted by: tedstoy  | Date: 11/21/12 02:54:40 PM]
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8. 
this article was terrible, it's wishful thinking born from a culture that has gotten bored with just 2 long time competitors.

Intel is not in trouble, it's a $70 billion per year company currently enjoying record margins and profits..... "in trouble" because analysts keep hyping up a $.2 billion per year design firm as the new nemesis.... grossly inadequate is the reality, Intel has so many things no other company can brag about, high margins, huge money, an abundance of experienced talent and vastly superior manufacturing, while being more nimble is desirable the reality is Intel will do fine even if they aren't overly agile because those $10 billion fabs they build keep them out ahead until they sort out short term issues.

an "analyst" with nothing significant to do ponders the failure of Intel a $70 Billion per year earner vs a $.2 per year earner and believes his comments have value.
0 0 [Posted by: clone  | Date: 11/24/12 09:06:30 AM]
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9. 
Not one comment in defence by gutless Intel trolls Avon and 1234 (formally jmlgx). It speaks volumes.
4 0 [Posted by: linuxlowdown  | Date: 11/30/12 07:33:42 AM]
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So linuxlowdown... if people DON'T reply to your continual provocations they are "gutless trolls". If they DO they are what... "mindless fanbois"? This thread would be a lot better if you stuck to analysis, not picking fights.
0 0 [Posted by: Papoulka  | Date: 12/14/12 06:09:35 AM]
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No Papoulka. Stick to what you know if can't see the picture in the mosaic.
0 0 [Posted by: linuxlowdown  | Date: 12/14/12 08:33:15 AM]
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