News analysis: Intel reshuffle moves Maloney closer to succession spot

The Intel reorganization brings senior VP Sean Maloney to the fore as a potential successor to Paul Otellini . . .
Written by Tom Foremski, Contributor

Yesterday's reorganization at Intel, with the departure of senior VP Pat Gelsinger, and the appointment of Sean Maloney as co-head of a newly formed products group is partly related to who will ultimately succeed Paul Otellini as CEO. [Please see: Intel reshuffles its executive deck; Consolidates product divisions | Between the Lines | ZDNet.com]

Although Mr Otellini at 58, is still many years from compulsory retirement age at Intel (65 years) the company has a long tradition of establishing a smooth succession roadmap. The latest moves appear to favor Mr Maloney, who leaves his job as Chief Marketing Officer and co-heads the new division Intel Architecture Group (IAG), which consolidates all of its product divisions.

The reorganization takes advantage of Sean Maloney's considerable skills in running large businesses within Intel. The chief marketing officer role is not as challenging as it once was because Intel has won the microprocessor wars. Intel's domination of microprocessor markets reached a new 4-year high in the second quarter of 2009.

Mr Maloney's challenge will be to ensure that Intel can hold onto its lead position and to evolve the Intel architecture in such a way as to preserve high margins. The evolution of the PC into the notebook and now into the netbook and mobile devices, brings the danger that cheap, powerful chips will undermine Intel's high margin microprocessors. Intel's renewed partnership with Microsoft and its operating systems offers a way to keep competitors at bay. But with the rise of cloud computing and platform independent highly graphic user interfaces, there is potentially strong competition forming on the horizon for Intel.

High performance graphics processors combined with high speed broadband connections to cloud based applications could route around the need for X86 architectures in many types of client computing systems -- not just netbooks or mobile devices. For example, there are several smart phone operating systems with ever larger numbers of applications that are not X86 based. These could migrate up into larger cloud-based client systems.

Intel's Atom is designed to extend the X86 architecture into netbooks and smart phone apps. But there is no guarantee Intel will be able to establish the same dominance it has enjoyed in client computing for two decades. It was unsuccessful once before when it tried to establish its StrongARM architecture in the mobile phone industry.

That's because the Telecom companies hold a strong position in determining the applications, operating systems, and features that run on mobile phones -- as Apple has found out. They have no desire to become commoditized industries in the same way that Intel and Microsoft commoditized the PC industry and managed to aggregate the majority of the profit margins.

The Telcos control the broadband networks which is why Intel is such as strong supporter of WiMAX. This technology could potentially vault over the walled regional and national markets controlled by the Telco and cable companies. Mr Maloney used to head up Intel's comms chip group -- he knows all about the challenge the Telcos pose to Intel.

Mr Maloney has traditionally been given the toughest jobs at Intel. And this is going to be one of the toughest yet.

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