Intel enters new era with Otellini at the wheel

Paul Otellini is the first sales and marketing executive to run Intel with the ascension of Craig Barrett to the position of chairman Wednesday.

Paul Otellini became the fifth chief executive officer in Intel Corp.'s 37-year history Wednesday, and the first to rise to the top spot without an engineering background.

Otellini replaces Craig Barrett, Intel's CEO since 1998, who will become chairman of the board of directors. Intel's board voted to promote Otellini last year, and the move became official at Wednesday's annual shareholder meeting in Santa Clara, California, where Intel is headquartered.

Andy Grove, the current chairman of the board, will step down from the board but continue to advise Intel's leaders. With Barrett and Otellini now at the helm of the company, Intel no longer has one of its founding members in control.

Grove indicated that he planned to make his opinions heard in his new role. "My motto is, no need to call me, I'll call you," he joked.

Barrett is also expected to remain heavily involved with Intel. He will maintain an aggressive travel schedule spreading Intel's message around the world, and stumping for an improved U.S. educational system, he said in an interview last month.

But Otellini's presence has already been felt at the world's largest chip maker, according to Grove. In a nod to his sales and marketing background, Otellini recently led a reorganization of Intel's operating groups to focus on specific markets, rather than operating groups centered on specific products.

"The new Intel looks a lot different from the old Intel. Product groups used to be organized around things we built, the new Intel is organized around markets and market opportunities," Otellini told shareholders during the meeting, which was available via webcast on Intel's site.

Barrett's tenure at Intel included one of the worst downturns in the history of the semiconductor industry, but Intel has not lost any ground to its competitors on his watch, and has re-attained the profit and revenue heights it enjoyed during the height of the dot-com bubble in 1999 and 2000, he said at the meeting.

Despite renewed competition from Advanced Micro Devices (AMD), Intel still holds around 80 percent of the market for desktop, notebook and server chips based on the x86 instruction set, according to data from Mercury Research.

Barrett also oversaw a massive investment into Intel's manufacturing facilities, building several new manufacturing plants and overhauling other ones to incorporate new technologies.

However, Barrett's attempts to diversify Intel's businesses beyond PC and server microprocessors have not paid dividends as of yet. The company builds flash memory chips, mobile phone processors, and networking chips, but has not managed to turn profits in those businesses, where it faces stiff competition.

Also, the introduction of the Itanium server processor in 2001 ranks of one of Intel's most notorious product launches of the last decade. Itanium was once promoted as a replacement architecture for Intel's x86 chips as the industry moved to 64-bit computing, but has settled into a role as an alternate chip for the high-end server market. Instead of Intel leading the charge to 64-bits with Itanium, AMD one-upped its larger competitor with a different approach that was compatible with older software, and Intel has since followed suit.

Intel is now moving ahead with plans to introduce dual-core processors across all its product lines. Otellini's challenge over the next few years will be making sure Intel does not repeat its experiences in 2004, when the company was forced to overhaul its road maps and cancel several high-profile projects. With over 15 different dual-core processor projects in the works, Otellini will have his hands full ensuring those products are released on time and without incident.

While Otellini served as Barrett's right-hand man as president and chief operating officer, Otellini does not plan to name a successor right away, Barrett said earlier this year. Many of the probable candidates for the job have recently taken on new roles as heads of Intel's new operating groups, and it wouldn't make sense to uproot those executives as they are getting their new groups up and running, he said.

The board of directors began planning the search for Otellini's successor in February, said David Yoffe, lead independent director of Intel's board and a professor with Harvard Business School.

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