Intel CEO startled board chairman with decision to retire

Intel CEO Paul Otellini's decision to retire likely caught a lot of people off-guard, one of them being the company's own chairman of the board.

Speaking with Barron's yesterday, Intel Chairman Andy Bryant acknowledged that he and Otellini had talked in the past about transitioning the CEO job. But Otellini surprised him last week with the decision to retire next May.

"I did everything I can think of to buy myself another year [of Otellini's leaderhip]," Bryan said. "We were targeting further out for this."

In yesterday's announcement, Intel touted Otellini's achievements during his eight years as CEO. Over that stretch, the company unveiled the ultrabook to the PC market, created processors for smartphones and tablets, enhanced the energy efficiency of Intel chips, and expanded through business partnerships and acquisitions.

But mobile is still one area where Intel has yet to make a strong mark. Despite the company's new chips for mobile devices, ARM processors still rule the mobile world.

And according to Bryan, mobile was a key factor in Otellini's decision to step aside.

"After almost 40 years at Intel, and the Intel CEO job for 8 years, which is a really hard job, he felt it was time to move to the next generation of leadership," Bryant told Barron's. "We do have big issues in front of us, moving to the tablet and phone markets, and he was ready to let the next generation lead those battles."

Bryant plugged Intel's progress in the mobile arena with ultrabooks and chips for smartphones and tablets. And in terms of manufacturing, Intel is ahead of Samsung and other players, he said. But he clearly feels the company has to use its technical prowess to build its mobile presence.

"I would expect Samsung and others to continue to make progress, and you never assume people you are competing with will stop the technological advance," he said. "But we expect to take advantage of the increasing gap in technology we've established."

And now the company faces another task: hiring a replacement for Otellini.

Admitting that "we are just now at the beginning of a process we didn't expect to have to conduct," Bryant said that Intel will search both internally and externally for the next CEO.

He did roll out the names of five senior executives at Intel who he considers important to the company: Renee James, head of software; Brian Krzanich, head of manufacturing; Stacy Smith, Intel's chief financial officer; Dadi Perlmutter, head of Intel's mobile efforts; and Arvind Sodhani, president of Intel Capital.

But finding the right person to succeed Otellini, run all of Intel, and carve out a greater niche in the mobile market -- all before May -- could be a challenge.