On eve of departure, Otellini looks back on four decades with Intel

Intel's CEO, who will retire soon, says the company can adapt to changes

Just a month away from retirement, Intel CEO Paul Otellini has reflected on his four decades with the company during his last quarterly earnings call with analysts and reporters.

Otellini is not going out on a high note, with Intel reporting a sharp drop in profits Tuesday thanks mainly to the slumping PC market. But despite finding little success in the smartphone and tablet markets, Otellini said Intel creates opportunities for itself by staying ahead of the fast-moving tech industry, and that this will drive the company forward in the future.

"Even as I prepare to pass the baton to a new generation, I know Intel's story is not completely written," Otellini said.

Intel's future is not entirely clear, but the company is putting more focus on mobile products and manufacturing technology, said Nathan Brookwood, principal analyst at Insight 64.

Intel struck it rich with the initial IBM PC design win in the 1980s, and did a "marvellous" job of nurturing that business, Brookwood said. After taking over as CEO in 2005, Otellini oversaw the era when PC users shifted from desktops to laptops, during which Intel thrived.

But Intel has been late to the next big transition, from PCs to tablets and smartphones, and that stumble happened on Otellini's watch, Brookwood said. If Atom ultimately succeeds, Otellini likely won't be credited for his contributions toward initiating development of Intel's smartphone and tablet chips, Brookwood said.

After joining Intel in 1974, Otellini held multiple technology and marketing positions before he took over as CEO. He followed a long line of distinguished names, including CEOs Craig Barrett, Andy Grove, and founders Gordon Moore and Robert Noyce.

It's still not known who will replace Otellini as CEO, and an announcement is expected by May 16 when Intel will hold its annual shareholder meeting. Top candidates include Stacy Smith, Intel's CFO and senior vice president; Renee James, senior vice president and general manager of software and services; and Brian Krzanich, chief operating officer and senior vice president. All three were promoted to senior vice president on Nov. 20, the same day Otellini's retirement was announced.

On Tuesday, Otellini said Intel responded quickly to developments in the technology industry, including the growth of the Internet and the move to microservers.

"Amidst all that change and reinvention, however, there has been a constant," which is that Intel has grown and thrived, Otellini said.

He touched on Intel's "tick-tock" development strategy, wherein it alternates between launching a new microarchitecure and a new manufacturing process. The strategy ensured regular chip advancements and stabilized Intel's product releases, development and manufacturing cycles. It was introduced at a time when Intel's product road map was uneven, and Advanced Micro Devices was taking away PC processor market share.

Intel also gained leadership in material sciences and moved ahead in manufacturing technologies, Otellini said. The company was the first to introduce chips with 3D transistors using the 22-nanometer manufacturing process, while some rivals are still trying to catch up.

Analysts have suggested Intel's future might lie in a full-fledged foundry strategy, where it manufactures chips for third parties like the contract manufacturers GlobalFoundries and TSMC (Taiwan Semiconductor Manufacturing Co.). There's been speculation that Intel could make the chips for Apple's iPhone and iPad, and the chip maker has already signed deals to make FPGAs (field-programmable gate arrays) for Tabula, Altera and Achronix using the 22-nanometer and upcoming 14-nanometer processes. Intel will start making chips in 14-nm factories later this year, with chips due to ship next year in PCs.

Otellini expressed confidence the PC market will return to growth in the second half of this year, driven by its new Haswell chips, more touch-based products and improvements in the overall global economy.

When Otellini joined Intel in the '70s, the microprocessor "had barely been invented," Brookwood said. Intel was primarily a memory company and later moved into microprocessors. The PC industry is again in transition, and Intel is pushing new processors, new laptop designs, and tools for enabling voice and gesture controls, in a bid to spur new innovation and growth.

"The company's resourceful. There's still plenty of opportunities there," Brookwood said.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com

Copyright © 2013 IDG Communications, Inc.

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