Intel picks insider as CEO, dashing hopes for shakeup


Sat, May 04, 2013 - Page 15

Intel Corp chose veteran insider Brian Krzanich as chief executive officer, disappointing some investors who hoped an outsider would push for aggressive changes to help the world’s largest chipmaker catch up in the mobile revolution.

The company also announced on Thursday that software honcho Renee James, 48, had been elevated to the post of president. Her appointment signaled to some that Intel, while likely intending to stick with its formula of intense investment to keep it ahead in the microchip technology game, is willing to explore new growth areas.

In November last year, the company said that it might go external for its next CEO, raising hopes that it might find someone to shake it out of recent doldrums.

Seen as a frontrunner for the job since then, Krzanich inherits a company with margins of almost 60 percent that has all but extinguished rival Advanced Micro Devices Inc in the past few years, and is now the dominant maker of microprocessors for computers and servers.

However, the company is in danger of finding itself sidelined as mobile devices, such as tablets and ever more powerful smartphones accelerate a contraction of the PC market. The majority of gadgets today run processors based on rival ARM Holdings PLC’s power-saving chip architecture.

“An external candidate might have been a better choice — with no negative reflection on Brian — simply because of the juncture Intel is at with what’s happening in the PC market and the need to take major action outside of PCs,” Williams Financial Group analyst Cody Acree said. “Brian may very well come in and make those same very difficult dramatic choices, but it’s less likely.”

He will take on the top job at the company’s annual shareholder meeting on May 16, replacing Paul Otellini.

A relative unknown outside the tight-knit semiconductor industry, Krzanich has worked at Intel since 1982, rising to chief operating officer just over a year ago.

The 52-year-old has earned a reputation for being a decisive leader who likes to keep a low profile.

Intel on Thursday stressed that he would have a strong partner in James, who in 2011 spearheaded Intel’s US$7.7 billion acquisition of No. 2 security software firm McAfee Inc.

Intel shares closed 0.5 percent higher at US$24.11 on the Nasdaq on Thursday.

Krzanich’s appointment comes at a crucial time for the company, which is gearing up for a transition in manufacturing processes to larger, 450mm wafers, a gradual migration that may eventually trim production costs, but which requires spending billions of dollars to upgrade facilities.

And it is scrambling to finalize and launch next-generation processors — code-named “Haswell” — that it hopes will cut down on power consumption and close the gap with ARM-based rival chips, popular among mobile users who prioritize battery life.

The Santa Clara, California, company came under fire during Otellini’s tenure for missing out on the mobile revolution, while underestimating the scale of the eventual drop-off in PC demand. The company, which once said emerging markets could offset a dropoff in developed-world demand, orchestrated a push on pricey “Ultrabook” laptops that has so far failed to excite consumers.

Last month, Intel warned that current-quarter revenue would fall as much as 8 percent, given the drop in PC sales. The company affirmed its full-year revenue growth target, but analysts think that forecast will be hard to hit.

“Some investors preferred an external option on the belief that new blood was needed,” Hans Mosesmann analyst Raymond James said.