Intel Tries to Secure Its Footing Beyond PCs
Kevork Djansezian/Getty ImagesSANTA CLARA, Calif. â" For the last several months, Andy Bryant, the chairman of Intel, has been trying to put steel in the backs of the companyâs employees. At meetings, he tells them that Intel must fundamentally change even though the computer chip maker still has what it takes to succeed in engineering and manufacturing.
It is an extraordinary message at a company with the fiercely confident unofficial motto, âOnly the paranoid survive.â Intel now finds itself faced with a fundamental question: Can the paranoid also evolve
Intel became the worldâs largest semiconductor maker through a partnership with Microsoft that dominated the personal computer business for a quarter-century.
PC sales are now collapsing, as users are relying more on mobile phones and tablets that rarely contain Intel chips.
Intelâs other mainstay business, chips for computer servers, is also changing. Cloud computing is creating huge demand for basic servers, but its simpler and cheaper designs may drive down prices and profit margins and offer openings to new competitors.
Amid all this turmoil in the industry, Intel is also scrambling to find a new leader. In November, Paul Otellini, who had been chief executive since 2005, unexpectedly announced his resignation. âItâs time to move on and transfer Intelâs helm to a new generation of leadership,â he said at the time, declining to elaborate on why he was leaving three years before reaching the companyâs retirement age of 65.
His decision left the company in limbo. âIt looks like there was no succession plan in place, and that is troubling,â said Hans Mosesmann, an analyst at Raymond James. âThey are probably a month away from Otellini leaving, and nothing is settled.â
While the board has been looking at external candidates, the new chief will almost certainly come from within. In contrast to Silicon Valleyâs culture of job-hopping, at Intel someone with 15 yearsâ experience can be called a newcomer. The companyâs leaders believe that it is critical for the chief executive to be steeped in the company culture.
âThe job of the board is to pick the candidate who can best grow into the job,â said a person with knowledge of the search, who spoke on the condition of anonymity. âIntel has to define its next act.â
In the meantime, Mr. Bryant, who has been at Intel for 32 years and served as its longtime chief financial officer, has been trying to prepare employees for a new era.
âHe says that the customers have changed, and we have to as well,â said a person attending one of Mr. Bryantâs meetings, who was not authorized to speak publicly. âWhere the revenue is now is not where the revenue is coming from in the future.â
Intel declined to make Mr. Otellini, Mr. Bryant or any other officials available for an interview, citing the quiet period before its first-quarter earnings report, due out on Tuesday. Those earnings, which will most likely reflect the collapsing demand for PCs, will follow the drops in revenue, operating margins and net income of 2012.
Analysts say the two top contenders to be Intelâs next C.E.O. are Brian Krzanich and David Perlmutter, who are close to Intelâs core business. Mr. Krzanich, Intelâs chief operating officer, oversees its fabrication facilities. Mr. Perlmutter, the chief product officer, oversees chip design.
Renee James, the head of Intelâs software group, is considered a more remote chance to run what has long been a hardware company. And Stacy Smith, Intelâs chief financial officer, is well liked inside and outside the company, but like Mr. Otellini, lacks an engineering background, which diminishes his prospects.
Revealing just how hard it would be for an outsider to step into the top job at Intel, the newcomer of these four joined Intel in 1988. But close watchers of the company wonder whether its insular culture is up to the challenge of expanding to different kinds of customers and devices.
âIn this new world, with smartphones and tablets, and cloud computing, things are moving around fast,â said Hector Ruiz, the former chief executive of Advanced Micro Devices, Intelâs top competitor in making PC chips. âIntel has the talent, engineering, and resources, but they are their own worst enemy.â
A version of this article appeared in print on April 15, 2013, on page B1 of the New York edition with the headline: Intel Tries To Secure Its Footing Beyond PCs.