Intel Chief Executive to Retire in May - New York Times (blog)

8:21 p.m. |Update

SAN FRANCISCO â€" After almost 40 years at Intel, its chief executive, Paul S. Otellini, is retiring, just as the company struggles with a momentous challenge: computing’s big shift to mobile devices.

Mr. Otellini, 62, surprised the technology world Monday by announcing that he would retire as an officer and director of the chip company this May, three years before he hits Intel’s mandatory retirement age. The board said it would immediately begin a search for a successor.

During a tenure that began in May 2005, Mr. Otellini established a strong track record. He increased Intel’s revenue 57 percent, to $55 billion at the end of 2011, and slightly widened its gross profit margin. Along the way, Mr. Otellini had to settle an antitrust suit for $1.25 billion, persuaded Apple to put Intel chips in its computers and cut 20,000 workers. Intel, the world’s largest semiconductor maker, now employs 100,000 people.

But the company’s share price has fallen about 20 percent in Mr. Otellini’s time. That is because the world of personal computers and computer servers, which Intel dominated partly through a close relationship with Microsoft, now competes with a global explosion of smartphones and tablets, which connect to large data centers. While Intel has some presence in these areas, it faces many new competitors and challenges, both to its business and to its way of thinking about products.

The right successor to Mr. Otellini, said Andrew Bryant, Intel’s chairman, would preserve Intel’s engineering-driven culture but turn it into an organization that is better able to anticipate rapidly changing consumer tastes.

“We don’t see the PC category going away, but we see that the market has changed,” Mr. Bryant said. “We need to figure out what the market wants.”

Mr. Otellini could not be reached for comment. In a statement issued by Intel, he said that “after almost four decades with the company and eight years as C.E.O., it’s time to move on and transfer Intel’s helm to a new generation of leadership.”

Last month Intel reported that its third-quarter net income fell 14.3 percent from a year earlier, to $3 billion, largely because of poor demand for PCs. The research firm IDC said that worldwide PC shipments fell 8.6 percent to 87.8 million units in the third quarter. Adding to the woes, Microsoft’s Windows 8 operating system, which Intel hoped would lift sales, was released in October to tepid reviews.

While they are both hurting from the PC plunge, Intel and Microsoft may be the best off of a troubled bunch. Last week, Advanced Micro Devices, Intel’s top competitor in chips for PCs, was forced to deny rumors that it was looking for a buyer. Its stock is down about 65 percent this year. Hewlett-Packard and Dell, both big PC makers, are also struggling.

Mr. Bryant said that Mr. Otellini had informed the board of his decision last Wednesday, citing a need for new leadership. He credited Mr. Otellini with putting Intel on track to produce chips that require less power. That is important both for battery-dependent smartphones and for data centers running hundreds of thousands of servers.

He also noted Mr. Otellini’s efforts in spearheading a category of lightweight laptop computers called ultrabooks, which have yet to take off in the market. Mr. Otellini also championed a wireless technology called WiMAX that never lived up to its billing.

Intel influences PC manufacturers in a number of ways. Besides designing and making the very core of their products, Intel also invests heavily in related fields; for example, through its venture arm it created a $300 million fund to promote ultrabooks. And it teaches its customers what they can do with each new generation of Intel chips, which in turn leads to new software development.

While Intel will look at both internal and external candidates, Mr. Bryant said, an internal candidate would probably prove a better fit, as that person would understand the culture. In its 45-year history, all of Intel’s five chief executives have been insiders.

Mr. Otellini’s departure is the third exit of a prominent executive from a major tech company in the last few weeks. In late October, Scott Forstall, who was the head of Apple’s mobile software development, was fired by Timothy D. Cook, the chief executive. Steven Sinofsky, the head of Windows at Microsoft, left the company a week ago, just after the introduction of Windows 8 and the Surface tablet. His brash personality led to internal clashes, and he and Steven A. Ballmer, Microsoft’s chief executive, agreed that it was time for him to go, according to a person briefed on the situation who was not authorized to speak publicly about it.

While both of those men were regarded as abrasive by those who worked with them, Mr. Otellini was not. A generally well-liked San Francisco native with an M.B.A. from Berkeley, Mr. Otellini was considered a break from Intel’s norm when he became chief because he was not formally trained in engineering.

But Ken Dulaney, an analyst with Gartner, drew a connection between the departures of the Microsoft and Intel executives.

“While Sinofsky and Otellini are gone for different reasons, underneath it similar forces are at work,” said. “Microsoft and Intel haven’t done a good job making PCs more compelling, and people are spending their dollars for electronics differently.”