Intel has a new CEO: Now what?

Brian Krzanich's appointment to the top job may mean bigger chip manufacturing deals -- with Apple, for instance -- but watch closely for subtle shifts, too.

Intel pitches itself as the sponsor of tomorrow, but it could lose that position if it doesn't break into mobile. Josh Lowensohn/CNET
Intel decided to play it safe with its next leader.

By going with tradition and tapping an insider, Chief Operating Officer Brian Krzanich, as its new CEO, Intel is signalling to the world that it has no intention of making any radical changes.

Nevertheless, Krzanich will need to make some big moves if Intel is to retain its dominant position in the technology world. The choices he makes in the coming months and years will have a big impact, not only on the company, but also on the future of the broader computing arena.

Krzanich takes over at a time when there are increasing questions about Intel's role in the mobile world and how it will handle the slowdown in the PC market. Yet, he isn't expected to abandon the x86 architecture -- the technology behind traditional computer chips that make up Intel's bread-and-butter -- in favor of the ARM technology popular in processors powering smartphones and tablets.

What Intel likely will do under Krzanich's leadership is focus even more on its manufacturing prowess. It may push deeper into the business of building the processors for other chip companies, possibly even Apple, and it may look for ways to pull even further ahead of its rivals in the technology behind crafting those chips. It also could sell some businesses that are less important or lower performing.

"The question [the board members] asked themselves was as we look at the next five to eight years, what direction do we want to take the company and what do we want to leverage?" Evercore analyst Patrick Wang said. "When you ask that question, it makes sense that you stick with your guns here and flex your manufacturing muscle."

Krzanich was widely expected to nab the top job at the Santa Clara, Calif., company. Intel has never picked an outsider for CEO, and it typically signals a successor by naming that person to the role of operating chief. Krzanich has a three-decades-long history at Intel and a deep technical background, both factors that should help him steer the chip giant in the years ahead.

Manufacturing, Krzanich's wheelhouse, is where Intel could make its biggest moves. It currently serves as a foundry for a few smaller chip designers, such as Altera and Microsemi, but none are at the same scale as a company like Apple.

Brian Krzanich, the next CEO, currently serves as Intel's executive vice president and chief operating officer. Intel
Intel has said it wouldn't strike a deal to manufacture chips for Apple, or any other big ARM-based processor designer, unless there's a pretty enticing incentive. But industry sources have told CNET that Intel and Apple have held such talks on and off for the past two years. And Krzanich may be more open to such a move than his predecessor, Paul Otellini, particularly if more of Intel's factories sit idle. A weak PC business -- the chief market for Intel's processors -- means less demand for chips out of Intel's factories.

Manufacturing mobile chips designed by others, even those based on technology from ARM Holdings, could be a way to keep Intel's fabs full and generate a new source of cash. J.P. Morgan analyst Chris Danely estimated that Intel's foundry business could generate $4.2 billion in annual revenue by 2017, offsetting the loss of revenue from the slowing PC market.

Aside from manufacturing, an immediate top priority for Krzanich will be figuring out just what's going on in mobile and what Intel needs to do to really succeed in that market. The company has managed to get its chips into a handful of phone models, but it has yet to appear in any major handsets and volumes remain low. It's crucial for Intel to break into the smartphones and tablets as the growth of its core PC industry stagnates. Krzanich will have to determine whether Intel's current strategy is the right one or if it needs to change course.

"Job No. 1 is to break into mobility," Moor Insights & Strategy analyst Pat Moorhead said. "They have to do that."

Intel will also need to look at related markets, like the "Internet of Things." That industry encompasses products that have sensors and are always connected to the Internet, such as wearables and smart refrigerators. And it will need to figure out how to make PCs desirable again. That could include pushing "perceptual computing," such as gesture and voice recognition, or helping design more attractive products.

Intel also will need to defend its position in the data center chip business. The company provides processors for the majority of the world's servers, but some hardware partners have started designing low-power microservers that use ARM-based chips. Intel will have to fend off those competitors while also making sure it's not sacrificing its high margins to gain business.

Krzanich, who will assume his new role on May 16, is unlikely to detail his strategy for Intel until later in the year. Until that time, market watchers can expect much of the same for Intel. But you can bet they're waiting to see what's up next for the chip giant.

 

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