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Otellini named president at Intel

Paul Otellini is named president and COO, giving him the inside track to becoming the company's next CEO.

Intel has named Paul Otellini president and COO of the company, giving the general manager of the company's PC processor group the inside track to becoming the company's next CEO.

The Santa Clara, Calif.-based chipmaker on Wednesday announced that with the promotion, Otellini, 51, will effectively run the day-to-day operations at Intel. CEO Craig Barrett, meanwhile, will concentrate more on strategic issues. The promotion takes effect immediately.

"Look at me as sort of Mr. Outside. Look at Paul as Mr. Inside, worrying about product development, sales and manufacturing," Barrett said in a conference call. "You should look at this as an orderly progression in how we have managed the company."

The promotion also makes Otellini the man to beat when it comes to succeeding Barrett. Barrett, 62, hits mandatory retirement age in less than three years and has no plans to retire early.

Historically, company presidents have gone on to the top spot. Barrett was promoted to president and COO while Andy Grove was CEO. Grove, now chairman, then stepped down in 1998 when the company appointed Barrett CEO. Until today, Barrett was Intel's president. The company has not had a COO since 1998.

Otellini's elevation underscores an ongoing change at Intel. For the past two decades, the chipmaker has concentrated most of its energies on the PC market and on churning out chips that are faster and cheaper than those from competitors. The first four CEOs all had Ph.D.s and came up with many of the scientific breakthroughs that helped create the semiconductor industry.

Starting in 1998, however, the company launched an ambitious program to diversify into communications, cell phones, online services and other markets, a strategy that has forced Intel to forge alliances with a wider variety of companies. As a result, sales, marketing, and general management and operations are becoming increasingly more important functions.

Otellini's claim to fame has come in sales--waging price wars against Advanced Micro Devices and promoting the Celeron brand name--as well as representing Intel at international conferences and on Wall Street. He doesn't have a Ph.D. or even an engineering background. Originally, he had planned to go to law school.

"He is more of a sales guy," said Dean McCarron, principal analyst at Mercury Research. "Because you have a maturing business, that is the way you have to go."

Like many high-ranking Intel execs, Otellini is essentially a lifer at the company. He started at Intel 27 years ago and has held a variety of positions, mostly in sales and marketing. Before Intel, he worked in the San Francisco Bay Area's Candlestick Park stadium selling food in the stands while attending UC Berkeley.

Otellini's promotion, though, could set off a chain of executive defections. Intel lost a number of executives, including David House and Carl Everett, after it became clear Barrett would become the company's next president, according to sources. Sean Maloney, general manager of the Intel Communications Group, has often been mentioned as a potential CEO candidate.

"Paul brings a breadth of operational experience," Barrett said. "He started out in finance. He ran some of our product groups. He has been running our largest business for the past four years. He is very qualified for the position.

"You should look at this as Paul getting an opportunity to demonstrate his capabilities," Barrett said.

There will be no direct replacement for Otellini. Instead, the Intel Architecture Group will be run by a group of five executives, who currently run subgroups within the organization. Mike Fister, general manager of Intel's enterprise platforms group, will continue to oversee server chip development, while Louis Burns and Bill Siu will manage the company's desktop products group. Anand Chandrasekher, vice president of microprocessor marketing at Intel, and Gadi Perlmutter will run the notebook division.

Otellini was not available for comment.

"He's clearly hands on as far as having a good understanding of the business," said Nathan Brookwood, an analyst at Insight 64. "Paul has never struck me as being afraid of the technology. You wouldn't expect him to go out and invent the next terahertz transistor, but as CEO he doesn't need to. He just needs to appreciate it."

As an example of Otellini being able to understand technology, Brookwood said that Otellini was one of the earlier high-level executives to steer Intel away from its reliance on Rambus-style memory.