Paul Otellini retires — What’s next for Intel?

Intel CEO, Paul Otellini 62, is leaving Intel and he announced the company's board yesterday that his plans to retire - well ahead of Intel's official retirement age of 65. Otellini will end his term as CEO by May 2013. This had come as a surprise for many as Intel is at the intersection of many challenges and it is at the crossroads when it comes to competing with ARM based products which has an early lead on mobile and tablet devices.

Otellini's career at Intel spans 4 decades and he joined the chip major once he graduated from UC, Berkeley and grew the ranks and became the CEO in 2005 when he took the reins from Craig Barrett.

Intel in a statement said: "Paul Otellini has been a very strong leader, only the fifth CEO in the company's great 45-year history, and one who has managed the company through challenging times and market transitions," said Andy Bryant, chairman of the board. "The board is grateful for his innumerable contributions to the company and his distinguished tenure as CEO over the last eight years."

"I have been privileged to lead one of the world's greatest companies," Otellini said. "After almost four decades with the company and eight years as CEO, it's time to move on and transfer Intel's helm to a new generation of leadership. I look forward to working with Andy, the board and the management team during the six-month transition period, and to being available as an advisor to management after retiring as CEO."

Under Otellini's tenure, Intel took a big leap to more powerful microprocessors and significant ones being the transition to the path breaking ‘Core' microarchitecture that defined a new industry performance. The ‘Core' architecture is now into the 3rd generation of its evolution has come to dominate the PC shipments almost marginalizing competitor AMD. Otellini will also be remembered for pioneering the ‘Ultrabook' range of notebooks and creating a new notebook category - extremely thin and light notebooks with full functionality.

Clearly Paul Otellini brought so much of fresh thinking that manifested in path breaking products at a time the PC industry underwent several realignments and vendor consolidations, and add to that the recessionary trends post 2007 - all made the market extremely challenging, but Intel sailed the choppy waters with relative ease under Otellini. It's interesting that despite his depth, he underestimated the smartphones and the tablets boom.

During Otellini's tenure as CEO - from the second quarter of 2005 through the third quarter of 2012 - Intel generated cash from operations of $107 bn, made $23.5 bn in dividend payments, and increased the quarterly dividend 181% from $0.08 to $0.225. From the end of 2005 through the end of 2011, Intel achieved record revenue and net income. During this period, annual revenue grew from $38.8 bn to $54 bn, while annual earnings-per-share grew from $1.40 to $2.39.

The market has responded with caution on Otellini's exit. For one, many welcome it on grounds that the new CEO will be able to give a new direction on mobility products (smartphones and tablets) which is Intel's pain area. But a visionary like Otellini leaving will definitely create huge vacuum and does come with big transition pangs.

Looking ahead, the new CEO need to wage a tough battle with vendors like ARM Holdings and Qualcomm, which dominate mobile and hand-held devices space - so soon Intel need to take that big evolutionary shift to mobility that is compelling enough for mobile device OEMs to shift to Intel on a large scale. But that's easier said than done, and 2013 looks like a strategic year for Intel and that will decide it course for the next big leap.

Nevertheless the retirement of Paul Otellini can be termed an end of an era and his name will be forever etched in the technology hall of fame for the times to come.