Intel CEO Paul Otellini is retiring and leaving an impressive track record, but he's also departing at a key inflection point for the chip giant. In other words, the new Intel CEO will have entirely new challenges to navigate.
First it's time to give outgoing Otellini his due. Intel's fifth CEO kept Moore's Law humming, improved processors and their power usage, dominated the data center and delivered a steady stream of earnings, dividends and cash flow.
On the flip side, Otellini's Intel has struggled in the mobile race and remains dependent on the PC market in many respects. Acquisitions such as McAfee are still tricky to define.
Piper Jaffray analyst Auguste Gus Richard set the scene:
Intel's CEO of eight years is leaving the company amidst what we see as difficult challenges for the company in the post-PC era. While Intel's manufacturing capability is currently second to none, Samsung is catching up. Increasingly, new designs favor less expensive process technology, not high performance transistors used in PC CPUs. In the mobile era, customers such as Google, Facebook and Apple are designing their own mobile processors and server processors. As the PC market has stagnated, Intel has tried to pivot to mobile and increasingly to foundry. However, Intel has had very limited success in mobile and Intel’s prices for foundry wafers are 3x that of TSMC's.
The new Intel leader---the company said it will consider both internal and external candidates---will face a series of large issues and most of them connect with mobile somehow. Among them:
Is there an answer to ARM? The growth among chip makers is with the likes of Qualcomm and Nvidia, two companies that are capturing design wins for tablets and smartphones. Those mobile devices are eating into PC sales. Intel will have some Atom based phones and tablets, but the jury is out on whether it will get its big hit. Should the ARM architecture continue to dominate, Intel will be a mobile outcast.
Will "good enough" chips be good enough? Intel's main pitch is that its march toward innovation and processing breakthroughs will keep the company dominant. But maybe Intel's march is misguided. Some analysts have argued that Intel is single-handedly funding the innovation in the industry when good enough chips are fine. For instance, Apple has been rumored to move to its own processors. Intel's tick tock cadence may be hitting the point of diminishing returns.
Should Intel be a contract manufacturer? Intel's strength is manufacturing and it could make processors for other companies---Google, Microsoft, Apple etc.---as well as keeping its own brand.
Can Intel diversify from Windows? Intel and Microsoft have been diverging somewhat, but the new leader's fate will still largely be tied to Windows. Without mobile traction---via Android most likely---it will remain tethered to Microsoft in many ways.