(By Mani) Intel Corporation (NASDAQ: INTC) is on the cusp of its biggest change in the last 10 years – naming a successor to Paul Otellini, who is slated to retire in May. The board is likely to name the next leader of the world's largest semiconductor company before its May 16th annual meeting.
The CEO decision is not only important for Intel, but the semiconductor industry in whole as Intel accounts for 14 percent of sales as the largest supplier. Intel's move could reshape the semiconductor industry, as the successor to Otellini should have a blueprint in place to grow the newer growth initiatives in a manner to disrupt the areas where Intel feels they are best-positioned -- mobile and software.
[Related -Intel Corporation (INTC) and 5 Other Stocks That Could Pop on Earnings This Week]
When anointing a CEO this time around, a deep understanding of the PC market no longer gives a candidate an edge, which gave Otellini an advantage in succeeding Craig Barrett in 2005.
"In our view, the next leader could depend on who is best suited to grow not one, but all, areas of Intel's efforts in mobile, data center, software and foundry (should the company succeed in growing the top line)," RBC Capital Markets analyst Doug Freedman wrote in a note to clients.
Investors are expecting an update over succession plans when the chip giant reports its quarterly results on April 16. They should not underestimate the potential impact Intel could have under new leadership. It comes at a critical time where its core PC market could be in terminal decline as a result of tablet and smartphone cannibalization, which has been enabled by an ARM eco-system.
[Related -Intel Corporation (INTC) Q4 Earnings Preview: Room To Pop On EPS]
That said, Intel is seeking other areas of growth outside of its core x86 processor market where the company has stumbled in the past. Newer initiatives include rising penetration into mobile markets, increasing software development and solutions, foundry services, and, most recently, an over-the-top set top box solution.
Consequently, Otellini's successor likely has a 3-5 year time-frame to augment sales in these newer initiatives and transform the company's platform offerings and perception in the industry.
"The next CEO's biggest challenge will be to move Intel from the stable of ‘old tech companies' to a leader of the new world order providing leadership that enables the ‘internet of things," Freedman said.
Unlike in years past where Otellini and the other Intel CEOs (Andy Grove, Craig Barrett) have all been promoted from within, this time could be different given the growth avenues are needed outside of PCs, including mobile, software, foundry, etc.
Notably, the candidate's age is relevant as Intel implements forced retirement at age 65.
"In our view, the market could likely be more receptive to Intel bringing in an external candidate, to accelerate the vision of transformation," Freedman noted.
Following is the list of potential contenders who could succeed Otellini: Sanjay Jha, Warren East, Patrick Gelsinger, Brian Krzanich and David Perlmutter.
Sanjay Jha: Sanjay Jha, 50, joined Motorola Mobility group as CEO from Qualcomm, Inc. (NASDAQ:QCOM), where he served as COO, in 2008. Jha stepped down in his role after Google's acquisition of Motorola Mobility was completed in May 2012. Prior to joining Motorola, Jha was COO of Qualcomm and president of Qualcomm CDMA Technologies responsible for overlooking Corporate Research and Development and QFT, in addition to his role as president of QCT, which is the chipset and software divisions.
Warren East: Warren East, 51, recently announced that he will step down as CEO of ARM Holdings effective July 1st. He had been the Chief Executive Officer at ARM Holdings and ARM Ltd. since October 2001. Before joining ARM, he was with Texas Instruments (NASDAQ:TXN).
Patrick Gelsinger: Gelsinger, 51, is the CEO and a Director of VMware, Inc. (NYSE:VMW) since September 2012. Prior to joining VMware, he served as President and COO of EMC Information Infrastructure products at EMC from September 2009-August 2012.
Gelsinger joined EMC from Intel where he was Senior Vice President and Co-General Manager of Intel's Digital Enterprise Group from 2005 to September 2009 and served as Intel's Senior Vice President, Chief Technology Officer from 2002 to 2005.
Brian Krzanich: Krzanich, 52, is currently Intel's Executive VP, Chief Operating Officer. Krzanich was named COO in January of 2012 after his role as Senior VP/GM of Manufacturing and Supply Chain. He has been with Intel since 1982.
David Perlmutter: Aged 59, Perlmutter currently is Executive VP, GM, of Intel Architecture Group (IAG) and Chief Product Officer. He is responsible for Intel's platform solutions for all computing segments including datacenters, desktops, laptops, handhelds, embedded devices, and consumer electronics. He has been with Intel since 1980.
Prior to the IAG, Perlmutter was Executive VP, GM, of the Mobility Group, where he drove the creation of Intel's latest mobile products from the high-performance Intel Core processor family to the low-power Intel Atom processor family which enabled the netbook segment and allowed Intel to enter the ultra-low power handheld market.