Intel Names Krzanich CEO to Replace Otellini

By Jeffrey Burt  |  Posted 2013-05-02

Intel Names Krzanich CEO to Replace Otellini

Intel, after a lengthy search and months of speculation over whether the board of directors would look outside the company, has named Chief Operating Officer Brian Krzanich as the chip maker's next chief executive, taking over later this month when Paul Otellini steps down.

The 52-year-old Krzanich, who has been with Intel since 1982, will assume the CEO post May 16. At the same time, Renee James, who currently is executive vice president and general manager of Intel's Software and Services Group, will become president of the company.

Otellini, who has spent four decades at Intel and the last eight as CEO, announced in November 2012 that he was retiring. This kicked off a search process that lasted longer than many analysts had expected and fueled speculation that Intel, which is aggressively pursuing growth markets to reduce its dependence on the contracting global PC market, might for the first time go outside the company to find a successor.

In March, it was reported that Intel directors had hired an executive search firm, Spencer Stuart and Associates, to assist with the search and that the organization was considering outside candidates. Among the names circulating were former Intel executive Pat Gelsinger, currently the CEO of virtualization software maker VMware, and ex-Motorola CEO Sanjay Jha. Some industry observers said someone like Jha would make sense, given his background in the mobile device space and Intel's aggressive push into the market for such devices as tablets and smartphones to compete with ARM and its chip partners.

However, Otellini said during a conference in December 2012 that he expected his successor would come from within Intel, as the company has always done. It would make more sense than bringing in someone from the outside who would need time to know and understand the company's culture and employees, he said.

"It's not up to me, but I think that's the most likely outcome," Otellini said. "I'm very comfortable with the internal candidates. … In this environment, why take the risk and take the time [of hiring an outside executive]? So my sense is that they will stay inside."

Krzanich was one of several Intel executives who were named as possible candidates to become Intel's sixth CEO. Others included Renee James as well as Stacy Smith, chief financial officer and director of corporate strategy. At one time, it was speculated that Intel was grooming Sean Maloney for the job, but the executive's career was temporarily put on hold due to a stroke in 2010. Maloney returned after a year to become chairman of Intel's China business until retiring last year.

In a statement May 2, Intel board Chairman Andy Bryant praised Krzanich's leadership and understanding of Intel and business.

"Brian is a strong leader with a passion for technology and deep understanding of the business," Bryant said. "His track record of execution and strategic leadership, combined with his open-minded approach to problem solving has earned him the respect of employees, customers and partners worldwide. He has the right combination of knowledge, depth and experience to lead the company during this period of rapid technology and industry change."


Intel Names Krzanich CEO to Replace Otellini

For his part, Krzanich touted the company he is taking over as an industry leader, thanks to its technology and its employees.

"We have amazing assets, tremendous talent, and an unmatched legacy of innovation and execution," he said in a statement. "I look forward to working with our leadership team and employees worldwide to continue our proud legacy, while moving even faster into ultra-mobility, to lead Intel into the next era."

Intel continues to be the top chip producer for PCs and servers, but the company is looking to rapidly expand into a wide range of new markets, from mobile devices and cloud computing to storage, networking and software. Company executives also are looking to leverage its high-end fabs and manufacturing prowess to create a foundry business building chips for other companies.

In an April 16 conference call with analysts and journalists to talk about the company's first-quarter earnings, Otellini noted that during his tenure the company has aggressively extended its reach into new markets, with both he and Smith talking about a "market of computing," where the distinction between devices such as notebooks, tablets, Ultrabooks and convertible systems disappears. Intel's goal is to provide x86-based chips for any computing device.

"We compete wherever there is computing," Otellini said.

Intel for the past several years has been driving up both the performance and energy efficiency of its chips for such devices as tablets, smartphones and microservers. The company has an aggressive road map for this year, from its upcoming next-generation Core "Haswell" chips to a range of new Atom systems-on-a-chip (SoCs), including "Bay Trail" and "Merrifield." It will now be Krzanich's job to oversee the company's future strategy.

Roger Kay, principle analyst with Endpoint Technologies Associates, said that despite the speculation about Intel considering outside candidates, the new CEO was going to be an Intel executive.

"After the fact, it seems obvious," Kay told eWEEK. "They're not going outside. They never go outside."

In Krzanich, Intel has a person who, as COO, had a high-level view of all of the company's operations and had managed more than 50,000 people spanning everything from Intel's manufacturing and foundry operations to human resources, IT and China efforts, he said.

In addition, given Intel's size and operations, it couldn't afford to have someone from outside the company come in as CEO and make arbitrary decisions that could negatively reflect on Intel and what it is trying to do, Kay said. He pointed to Hewlett-Packard's difficult 11 months under Leo Apothoker, the former SAP CEO who tried to make HP more of a software company and announced the company was getting rid of its PC business. HP is still trying to recover from Apotheker's brief tenure and general instability in the CEO office.

"[Intel] just cannot afford for anything like that to happen," Kay said.

Intel Names Krzanich CEO to Replace Otellini

Analysts also said Krzanich's operational expertise will be crucial for Intel going forward.

"We have always viewed manufacturing as Intel's core sustainable advantage, and Mr. Krzanich understands this aspect of Intel's business better than anyone else," Ross Seymore, research analyst at Deutsche Bank, wrote in a research note. "The push into the foundry business is perhaps the clearest evidence that the company intends to press its manufacturing advantage into adjacent markets. Given the limited number of external candidates with [integrated device manager] experience, it was always our view that an internal candidate would be the next CEO."

Jack Gold, principle analyst with J. Gold Associates, said a focus on operational excellence rather than just engineering expertise "is important as Intel needs to optimize its huge investments in its fabs. This needs to include filling those fabs by selectively bringing in outside work that gets utilization to higher levels and complements production of its core products.

"Putting an 'ops guy' in charge also reinforces Intel's move to be more competitive and decrease its overhead, which it has been doing over the past couple of years," Gold said in a research note. "A leaner company is what the board has been looking for (as well as the financial markets), and this promotion sends the message it will continue to emphasize a 'lean and mean' approach to business."

The promotion of James to president also was important, according to the analysts. It keeps a valuable executive in the fold, and also indicates the company's desire to expand beyond its traditional PC and server chip into growth areas, including software.

"It clearly signals the board wants to make Intel a much broader company, with increased emphasis/reliance on software and services," Gold wrote. "It also allows more of a balance between the core chip engineering businesses and the acquired SW and services businesses (e.g., WindRiver, McAfee). The synergies with these businesses have not been as great or rapid as they should be, and this move should give them increased exposure and emphasis in the overall Intel ecosystem. Expect to see increased cooperation and a bigger portion of the revenue come from this refocus, as well as more of the key technologies making their way into the base silicon (e.g., security)."


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