Intel Reorganization Creates Business, Exec Opportunities

With a week to go before their annual developer conference, Intel officials are having to deal with a major internal reorganization and the departure of longtime executive Pat Gelsinger.

Intel announced Sept. 14 that Gelsinger, who had been senior vice president and general manager of its Digital Enterprise Group, is leaving the company. At the same time, giant storage vendor EMC announced that Gelsinger is joining that company as president and chief operating officer of the Information Infrastructure Products unit.

Gelsinger’s departure will be felt at Intel—he had worked there for almost three decades, and had helped drive the company’s core processing products—but it also will open up opportunities for other executives, and apparently helped influence Intel to reorganize its businesses, according to industry analysts.

Embedded devices, 32-nanometer chips on Intel's IDF agenda.

It also could make clearer a line of succession for when current CEO Paul Otellini retires, they said. In particular, it elevates Sean Maloney’s position with Intel. Maloney had been an executive vice president and chief sales and marketing officer at Intel before the reorganization.

“There are a lot of people who say this lines up [Maloney] to succeed Otellini, which makes sense,” said Roger Kay, an analyst with Endpoint Technologies Associates, pointing out that, like Otellini, Maloney comes from the marketing side of the business.

Intel is putting all of its major product divisions—including the highly profitable server and client chip businesses—under the newly formed Intel Architecture Group (IAG), which will be co-managed by Maloney and Dadi Perimutter, who had been executive vice president and general manager of Intel’s Mobility Group.

Maloney will be responsible for business and operations, Intel said, while Perimutter will focus on product development and architecture.

Another part of the reorganization centers around manufacturing, where Andy Bryant, Intel’s chief administrative officer and an executive vice president, will oversee the Technology and Manufacturing Group.

The moves also will enable Otellini to move away a bit from manufacturing and let him focus more on business strategy and growth initiatives within Intel, according to a company statement.

Within IAG, there will be six business groups, including the PC Client Group, which will bring together Intel’s desktop and mobile product businesses. The Data Center Group will be focused on servers, cloud computing, networking and HPC (high-performance computing). Other units include the Visual Computing Group, the Digital Home Group, the Embedded and Communications Group and the Ultra Mobility Group, which will focus on growing Intel’s opportunities in mobile handheld devices.

The reorganization also comes at a time when Intel has been aggressively looking to move beyond its client and server roots into such areas as handheld devices and embedded products. The creation of some of the business groups reflects that drive, analysts said.

“Intel really very much wants to move beyond traditional computing,” said Gordon Haff, an analyst with Illuminata.

Haff pointed to Intel’s Atom processor, which while it’s made its biggest noise to date in the burgeoning netbook space, initially was seen as a way to drive Intel technology into new classes of Internet-enabled devices, an area that is not that clearly defined, he said.

“Probably something in between smartphones and low-end laptops,” he said.

Haff also said it makes sense for Intel to continue to focus on expanding its reach in the fast-growing mobile space.

“Mobility will continue to be important to their business going forward,” he said.

For Gelsinger, the move probably comes at the right time, Kay said. He had been an important part of Intel for years, but probably understood that he had hit the ceiling.

“One of the things about Pat is that, unless he gets to run the company, there’s nowhere for him to go [at Intel],” said Kay, speaking from outside a WiMax event in Boston that Maloney and other Intel executives were attending.

The move to EMC probably gives him a shot at CEO Joe Tucci’s job when he retires, he said. Tucci, now 62, reportedly will step down in three years.

 For Intel executives, Gelsinger’s move gives them opportunities, he and Haff said.

“The big trees in the forest, when they go down, they open up the canopy and let more sunlight into the smaller trees below them,” Kay said.

One customer said Gelsinger moving to EMC could be a benefit for his company.

“We are an EMC customer, too, so if Gelsinger moving helps EMC better utilize Intel products in their Clariion line and improve their internal processor development for their VMAX product line, then it could be a win for both EMC and Intel,” Jevin Jensen, senior director of IS technical services at Mohawk Industries, said in an e-mail.

Jensen said the reorganization itself doesn’t worry him, though he would like to see Intel officials explain the motives behind the moves.

Illuminata’s Haff said making the announcements now, a week before IDF, makes sense. It’s better to get the news out of the way now, rather than having it hit after IDF concludes and having to explain the news to customers after three days at the event.

Still, Kay said, it will be disruptive as the chip maker has to reconfigure some of its plans for the show. For example, Gelsinger had been on the agenda to give one of the keynotes.