Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Brian Krzanich Wins Intel’s Predictable CEO Horse Race

brian-krzanich_1Intel stuck to its script today and named COO Brian Krzanich as its new CEO.

In November, when Paul Otellini announced his surprise retirement, I pointed out in a piece covering all the major contenders to succeed him, that every Intel CEO since Andy Grove was COO first. Krzanich will be Intel’s sixth CEO.

And while a lot was made of the fact that Intel’s board of directors was willing to look outside the company, and a lot of people rooted for Intel to name an outsider to run it, the board, led by its chairman, longtime Intel CFO Andy Bryant, decided to stick with established practice.

It’s not as though outsiders were not considered. I’ve heard reliable chatter that the headhunter Intel hired reached out to several people who turned the opportunity down. They include: Oracle President Mark Hurd; VMware CEO Pat Gelsinger, an Intel veteran once considered a likely successor to Otellini, but who was recruited away by EMC CEO Joe Tucci; and Michael Daniels, the former head of IBM’s services business, who retired on March 31.

Krzanich was promoted to the COO job in a surprise shake-up last January. He had run worldwide manufacturing, and as COO he took over some IT and human resources functions that had previously belonged to chairman Bryant. He joined Intel in 1982, and has been an on-the-ground plant manager at Intel’s complex in Arizona. During 2001-2003, he oversaw a complex transition in Intel’s manufacturing technology across its entire global footprint of factories.

Patrick Moorhead, head of research firm MoorInsights, said Krzanich’s naming is a deliberate signal that at a high level much of its strategy will remain the same: “The strategy that has kept Intel running for the last 20 years will remain unchanged: Fab first.”

That means that Intel’s factories — the sprawling multibillion-dollar facilities known in chip industry lingo as “fabs” — will continue to be filled in the most efficient way possible. Intel is at its core a manufacturing company, and is indeed one of the few major chip suppliers left — Samsung is another — that owns its own fabs.

Since they’re so expensive to build, and equally expensive to equip, and since they need to be retooled every few years, Intel’s business model is probably one of the biggest exercises in managing depreciation over time.

The move is also a signal that pushes back against the people who have argued that Intel needs a strategic shake-up. At a moment when PC sales are sliding at a historic rate in favor of tablets and smartphones, Intel has largely been absent from those markets. So it’s no surprise that Intel’s earnings results have suffered in recent quarters.

Meanwhile, phone makers and tablet makers have been using chips from companies like Qualcomm, Broadcom and Nvidia that use designs licensed from the British firm ARM Holdings. ARM-based chips are in practically all the world’s smartphones. Apple uses them in the iPhone and iPad, and they appear in most Android-based phones and tablets, as well.

As Mike Bell, head of Intel’s mobile chip operations, told me in an interview at D: Dive Into Mobile in New York last month, the company has made some strides in the mobile space, landing its chips in some phones and tablets, but they haven’t caught on in huge numbers yet.

renee-james_1

There’s another important signal to consider. Renée James, the head of Intel’s software business, was named president. She has been chairman of the McAfee division that Intel acquired when it bought out that security software company last year, as well as of Wind River Systems, another software acquisition. For several years she has also been Intel’s point person in its dealings with Microsoft. While she was officially mentioned as a contender to be CEO, she is, at 48, still in contention for the post. She also sits on the boards of Vodafone and VMware, and for a time was Andy Grove’s chief of staff. (And, as I like to point out for fun, like me, she’s a University of Oregon graduate, and finished her MBA there the same year I was wrapping up my BA.)

But James’s elevation to president also sends an important signal about the rising importance of software at Intel. While Intel is at its core a manufacturing company, it has recognized the importance of software and acted accordingly. As Moorhead put it: “Intel once said it is the third-largest software company in the world, and I can’t prove, but I believe it. Intel is sending a really important message here. It sees software as where the puck is going.”


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