CORRECTED-UPDATE 3-Intel CEO to retire as chipmaker struggles with mobile

Mon Nov 19, 2012 12:01pm EST

(Corrects spelling of surname to Otellini from Ottelini; the error also occurred in updates 1 and 2)

* Otellini has been CEO since 2005

* Intel says CEO search could take six months

* Chipmaker promotes three executives

* Intel's dominant position has slipped as PC sales dwindle

By Noel Randewich and Liana B. Baker

SAN FRANCISCO/NEW YORK, Nov 19 (Reuters) - Intel Corp said on Monday that Chief Executive Officer Paul Otellini will retire in May as the world's leading chipmaker grapples with weak PC demand and an industry shift toward mobile computing.

Intel's board said it would consider internal and external candidates for the CEO position and it expected the "leadership transition" to last six months.

Intel, whose processors are dominant in personal computers, has been slow to expand into the fast-growing mobile industry where Apple's iPads and iPhones, and other popular mobile devices, are made using competing technology from Britain's ARM Holdings.

"We all know that everyone is using smartphones and tablets now. It's the era of Intel versus ARM, so it may be good to come in with some fresh blood and a new perspective," Evercore analyst Patrick Wang said.

The company said it would promote three executives to executive vice presidents. They are Renee James, who is in charge of Intel software; Brian Krzanich, who is chief operating officer and oversees manufacturing; and Stacy Smith, the chief financial officer and director of corporate strategy.

Smith, well-known by Wall Street, and Krzanich have in the past been viewed as potential future CEOs.

"There a comfort level with Stacy (Smith)," said Williams Financial analyst Cody Acree. "I think we'd get more continuity with the current roadmap and direction than you would with anybody else's."

Krzanich, a three-decade Intel veteran, made a name for himself improving the efficiency of the chipmaker's cutting-edge factories. He was promoted to Chief Operating Officer last March, effectively throwing him in the running for the CEO position.

Analysts said James' focus on software instead of hardware made her less likely to be promoted to CEO.

END OF AN ERA

Since it was founded in 1968, Intel has had a history of promoting CEOs from within. But the increasing belief that the "PC era", which Intel helped create, may be drawing to a close, could lead Intel's board to choose an external candidate with experience in mobile, analysts said.

"Previous CEO transitions have all involved carefully groomed internal candidates, but if Intel's Board is now looking externally -- to bring in new skills -- that would explain the lack of a named successor and length of time in transition," said Longbow Research analyst JoAnne Feeney.

Otellini, 62, was the company's fifth CEO, stepping into the post in the second quarter of 2005. The company has an internal rule of retiring its CEOs at age 65.

He worked at Intel for nearly 40 years -- most of its history.

The Santa Clara, California company has long been accustomed to being king of the PC market, particularly through its historic "Wintel" alliance with Microsoft Corp, which led to breathtakingly high profit margins and an 80 percent market share.

But it has struggled to adapt its powerful PC processors to be used in smartphones and tablets that depend on batteries. Its market share is less than 1 percent of smartphones, trailing Qualcomm Inc, Samsung Electronics Co Ltd, ARM Holdings Plc and others.

That leads some investors, who are already concerned about a lackluster global economy, to ask if Intel's invincibility has come to an end and whether the company's potential for profit and revenue growth may be limited.

Intel's shares gained 0.5 percent to $20.28 in Nasdaq trading. (Reporting by Noel Randewich in San Francisco, Liana B. Baker in New York; Editing by Lisa Von Ahn, Maureen Bavdek and Kenneth Barry)

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