Bloomberg News

Intel Appoints Krzanich as CEO to Speed Shift to Mobile

May 02, 2013

Intel Elevates Operating Chief Brian Krzanich to CEO Position

Brian Krzanich, chief operating officer of Intel Corp. Photographer: Noah Berger/Bloomberg

Intel Corp (INTC)., the world’s largest chipmaker, named Chief Operating Officer Brian Krzanich as chief executive officer, leaning on an insider to accelerate a shift toward mobile devices as the personal-computer age wanes.

The former factory manager will become the sixth CEO in Intel’s history at the annual shareholder meeting on May 16, when Paul Otellini, 62, steps down as CEO and director, Santa Clara, California-based Intel said today in a statement.

In opting for Krzanich, 52, Intel hewed to a tradition of hiring for the top job from within, backing a three-decade veteran who firmly grasps the complexities of making the chips that run more than 80 percent of the world’s PCs. Yet as Intel lags behind Qualcomm Inc. (QCOM:US) in the production of semiconductors for smartphones and tablets, the decision not to appoint an executive who has expertise in mobile technology carries risks.

“A fresh set of eyes from an external candidate might have been a good move,” said Cody Acree, an analyst at Williams Financial Group Inc. in Dallas who has a hold rating on the stock. “Intel has to be ultra-successful in another large market or in a lot of markets to reinvigorate your growth.”

Intel shares rose 0.5 percent to $24.11 at the close in New York. While the stock has gained 17 percent this year, it has dropped 6.2 percent since Otellini took over in May 2005.

Krzanich’s main challenge will be jump-starting Intel’s efforts to gain ground in the market for chips that run mobile devices. The PC industry, Intel’s stronghold, is facing its second consecutive decline in annual sales this year while tablets and smartphones continue to surge.

One Percent

Intel has spent more than a decade and billions of dollars trying to gain a foothold in smartphones, yet chips made using technology from ARM Holdings Plc (ARM) still account for more than 95 percent of that market. Qualcomm is the leader in semiconductors for handheld devices. Intel ended last year with less than 1 percent of the market for phone microprocessors.

Krzanich said the push into mobile will gather steam on his watch. The executive said he presented his strategy for speeding up Intel’s entry into mobile to the board, and will make it public once it has been shown to management and staff.

“We see that the world is becoming more mobile,” Krzanich said today in an interview. “We see that the growth is moving towards those areas, and we believe we have the right assets, right product capabilities to go into those at a much, much faster rate.”

Intel Engineers

Krzanich’s elevation to CEO returns an engineer to the top job at Intel, which was founded by Gordon Moore and Robert Noyce in 1968. It was run by Andy Grove and then Craig Barrett, who have advanced science degrees. Otellini has degrees in economics and business.

When Intel announced Otellini’s planned departure in November, it named three executive vice presidents: Krzanich, Stacy Smith and Renee James, marking them as the primary candidates to lead the 44-year-old company.

By February, Intel had hired Spencer Stuart & Associates Ltd. to help find its next leader, people familiar with the matter said at the time, a sign that the chipmaker might consider external candidates. Still, Krzanich was seen as a front-runner at the time.

In the end, Intel stuck with its own managers. The company said today that James, 48, will take the role of president, becoming Krzanich’s top lieutenant. She also will assume that job on May 16.

“After a thorough and deliberate selection process, the board of directors is delighted that Krzanich will lead Intel as we define and invent the next generation of technology that will shape the future of computing,” Chairman Andy Bryant said in today’s statement.

Factory Manager

Known as “BK” at Intel because of the difficulties some have in pronouncing his surname (Kris-an-itch), the company’s new CEO worked his way up Intel’s ranks as a factory manager. So he brings an understanding of how its advanced plants can deliver winning products.

Krzanich has a bachelor’s degree in chemistry from San Jose State University and holds a patent for semiconductor processing. He joined Intel in 1982 in New Mexico as an engineer, just as the personal-computer industry was beginning to take off. At the time, Intel was vying with companies such as Motorola Inc. and International Business Machines Corp. in the burgeoning computer-processor market.

By ratcheting up the speed of its processors through improvements in manufacturing, Intel was able to make itself the industry standard and forced out all opposition other than Advanced Micro Devices Inc. (AMD), which has struggled to attain more than 20 percent of the industry’s sales. When AMD did threaten Intel’s position in 2005, Intel invested more in its technology and snatched back the market share it had given up.

PC Declines

That recipe hasn’t helped it make a stand in mobile phones and tablets, which now threaten growth in Intel’s core business. The PC market declined 3.7 percent last year, its first drop in a decade, and is on course to contract again this year after shrinking 14 percent in the first quarter, according to market researcher IDC. By comparison, tablet shipments climbed 78 percent in 2012, and smartphone unit sales jumped 46 percent, IDC said.

Still, Krzanich’s background refining production technology could help Intel finally mount a serious challenge to its phone rivals such as Qualcomm and Samsung Electronics Co., said Patrick Wang, an analyst at Evercore Partners Inc. (EVR:US) in New York.

“They need to try to amplify that manufacturing advantage as much as they can,” Wang said. “They don’t have another edge.”

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net; Nick Turner at nturner7@bloomberg.net


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