Intel Inside: Looking inward for new CEO may be best bet

Tags: Careers

COO Krzanich, CFO Smith strong contenders for CEO post

SAN FRANCISCO: Wanted: Visionary CEO to help world-class chipmaker expand beyond struggling personal computer market into tablets and smartphones. Experience with cutting-edge manufacturing plants and $10 billion annual capital expenditures a plus.

Intel raised eyebrows on Wall Street and in Silicon Valley this week when it said it will consider an outsider to take over from outgoing CEO Paul Otellini, potentially ending a four-decade tradition of internal succession. Some analysts took that as a sign the top global chipmaker might be considering a transformative hire.

Intel came under fire during Otellini’s tenure for missing out on the mobile revolution, insisting that emerging markets would prop up growth while underestimating the scale of the eventual drop-off in personal computer demand, and orchestrating a push on ‘Ultrabook’ laptops that have so far failed to excite consumers. A future leader not steeped in Intel’s insular culture could potentially open the chipmaker’s prized factories for the first time to outside customers like Apple or pursue other new strategies to expand into tablets and smartphones, said analyst Nathan Brookwood of Insight 64, a consulting firm.

But any investor hoping Intel will hire an outsider with a dramatic solution to the top chipmaker’s PC plight may be out of luck, experts say. While the idea of an iconic visionary like Steve Jobs stepping in to lift Intel into the mobile market, its Achilles heel, may sound attractive, it could open the chipmaker to new risks should it waver from its traditional focus on hard-core manufacturing.

Gurus with the experience to run a company with $53 billion a year in sales, a $10 billion capital spending budget and cutting-edge ch­ip manufacturing plants are few and far between — and e­ven rarer outside of Intel, which is struggling with falling PC sales and meagre progress in mobile computing. “If you bring someone in who hasn’t run chip companies it’s going to be very difficult because Intel is somewhat unique,” said Patrick Henry, CEO of Entropic Communications, which m­a­kes chips for home entert­ainment. “It would probably s­urprise me if they didn’t hi­re one of the internal guys.”

Silicon Valley peer Hewlett-Packard exemplifies the risks of a poorly thought-out external hire, recruiters and analysts say. During his tumultuous 11-month ten­u­re, former software CEO Leo Apotheker engineered the w­i­dely panned $11 billion acquisition of Autonomy, which HP accused this week of accounting wrongdoing enroute to swallowing an $8.8 billion charge.

He also presided over several quarters of lacklustre financial results.

“I don’t think (Intel) needs a 180-degree transformation. You don’t want somebody like a Leo Apotheker coming on and being your complete undoing,” said JMP analyst Alex Gauna. “Because of how badly things have gone for HP, the most probable scenario for (Intel) at the end of all this in May is that it looks very much the same.”

But Mel Connet, a tech industry executive recruiter at Heritage Search Partners in Menlo Park, California, said “My only advice would be not to use the same search firm that HP used.”

Chief operating officer Brian Krzanich, who is Intel’s manufacturing guru, is frequently mentioned by Intel employees as a strong contender to become CEO, partly because manufacturing is at the heart of Intel and previous chief executives have been promoted from the COO position. Chief financial officer Stacy Smith is well known by financial analysts and many favour him, believing he is the best bet for keeping Intel stable.

Sanford Bernstein analyst Stacy Rasgon said a CEO hired from the ranks would have instant credibility among the company’s tight-knit workforce. “The issue here is not any sort of miss-execution on their part,” said Rasgon.

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