Intel picks insider as CEO

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Fin24/ Reuters - May 3rd, 08:28

San Francisco/New York - Intel chose veteran insider Brian Krzanich as chief executive, 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 Renée 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.

The company said last November 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 November, Krzanich inherits a company with margins of almost 60% that has all but extinguished rival Advanced Micro Devices in the past few years, and is now the dominant maker of microprocessors for computers and servers.

But 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 personal computer 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," said Cody Acree, an analyst at Williams Financial Group.

"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 liked to keep a low profile. Intel on Thursday stressed that he will have a strong partner in James, who in 2011 spearheaded Intel's $7.7bn acquisition of No. 2 security software firm McAfee.

She ran software product and service sales as well as a team of engineers focused on improving the performance of Microsoft's Windows 8 and Google's Android software when run on the company's microchips.

Her elevation "puts emphasis on the many businesses Intel is in beyond just chips. This is an important promotion, and it clearly signals the board wants to make Intel a much broader company," said Jack Gold, who runs research outfit Jack Gold Associates.

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

Crucial time

Intel's board took six months to deliberate on who could best helm a company with deep roots in Silicon Valley and computing history. The company today rakes in more than $50bn in annual sales and runs manufacturing facilities across the globe.

Over the past few months, media reports have mentioned several possible external candidates including Sanjay Jha, former head of Motorola's mobile device division.

Intel Chairperson Andy Bryant said Krzanich is capable of effecting a transformational move. But he also said Krzanich and James made for an "extremely powerful" partnership, and that the pair had co-developed a long-term strategic vision for the company that won the board over.

"They formed a partnership through the last few months that has blossomed into an extremely powerful pair," he said.

"You'll see a fairly dramatic change over a period of time," Bryant told Reuters in an interview. "If you look at Intel's past, with every CEO we've had that."

Krzanich's appointment comes at a crucial time for the company, which is gearing up for a transition in manufacturing processes to larger, 450 millimeter 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 finalise 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.

A chemical engineer by training who went to school in Northern California, Krzanich started with Intel in New Mexico as a process engineer before moving on to a series of factory management positions. He holds a patent for semiconductor processing and sits on the board of an industry association.

He told Reuters in a 2012 interview his best work during his three-decade career included shortening turnaround times in the chipmaker's factories.

Intel announced in November that it was looking for a new CEO as Otellini announced plans to retire.

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 personal computer 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%, 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," said Raymond James analyst Hans Mosesmann.

But "the appointment is an indication that Intel will continue Paul Otellini's strategy of building bigger, better fabs to attack the market."