Intel taps COO Krzanich as chipmaker’s next CEO

NEW YORK — Intel said Thursday that it has chosen its chief operating officer, Brian Krzanich, as its new CEO. He will steer the world’s largest chipmaker in an era where PC sales are cratering while smartphones and tablets thrive.

Krzanich, who is 52, will replace Paul Otellini on May 16, at the company’s annual meeting. Otellini had announced his decision to resign in November. Otellini, 62, will be ending a nearly 40-year career with Intel, including an eight-year stint as CEO by the time he leaves.

In an interview, Krzanich said he will tackle the challenge of declining PC sales by relying on the assets that Intel is built on: its engineering prowess and enormous, billion-dollar chip factories, based on technologies that are years ahead of its competitors.

“Those assets will be focused more and more toward the ultra-mobility space ... tablets and phones,” Krzanich said. “These are areas that we need to build a presence in, and we have the assets to bring to bear on it. And those are the same assets that have made us so successful in the past.”

Krzanich isn’t inheriting Otellini’s title of president. It will go instead to software chief Renee James, 48, creating a two-person “executive office” at the head of the company. James had been another candidate for the CEO post, along with Stacy Smith, chief financial officer and director of corporate strategy.

Krzanich said the division of labor was his choice. He and James put together the strategy for getting into mobile chips, and when the board picked him as CEO, he requested that James become his second-in-command.

“The best way to go implement (the strategy) quickly is to have two people in the leadership team going forward so you can work twice as fast,” Krzanich said.

Krzanich started at Intel Corp. in 1982 as a process engineer and worked his way up through the manufacturing side of the business to become COO in January 2012.

“His open-minded approach to problem solving and listening to customers’ needs has extended the company’s product and technology leadership and created billions of dollars in value for the company,” Intel said in its announcement.

The COO job is the traditional stepping-stone to the CEO post at Intel. Both Otellini and his predecessor, Craig Barrett, held that job before becoming CEO.

Krzanich will be Intel’s sixth CEO since its founding 45 years ago. The relatively slow turnover reflects Intel’s success, and its foundation as an operator of billion-dollar factories that take years to pay off. Krzanich comes out of a manufacturing organization where meticulous attention is required to churn out processors with billions of minute details.

Intel started out mainly as a maker of memory chips, but vaulted into the global limelight with the launch of IBM’s first PC in 1981. Intel supplied the central processor for that PC and managed to maintain its position as the dominant supplier in the market, despite many challengers.

Now, however, the market is changing under Intel, and the company is scrambling to prove that it can make chips that work well on smartphones and tablet computers.

Qualcomm Inc. and other chipmakers have been more successful in the mobile-device market so far, undercutting Intel’s financial performance and standing among investors. Last year, both Intel’s earnings and stock price fell by 15 percent from 2011.

Last month, Intel said it still expects its sales to grow this year, propped up by sales of chips to business PCs and servers. It’s also counting on a new generation of power-sipping processors to boost Intel’s presence in tablets.

Analyst Doug Freedman at RBC Capital Markets said Krzanich is a safe, consensus pick for the CEO post, one unlikely to attempt a significant strategy change.

“We view Mr. Krzanich as very much focused on delivery of results over image or perception,” Freedman said.

Otellini joined the Santa Clara, Calif., company after graduating from the nearby University of California at Berkeley and worked his way up the ranks before succeeding Barrett as CEO in May 2005.

Intel’s board wasn’t entirely satisfied with Otellini’s performance last year. To reflect its disappointment, the board’s compensation committee trimmed the cash portion of Otellini’s incentive pay by 19 percent from the previous year to $5.23 million. But his overall pay package, including stock awards, grew 10 percent to $18.9 billion, and the board said it wanted to keep him.

James is a 25-year veteran of Intel and has led the company’s expansion into providing software for a variety of applications, including smartphones. She was also in charge of dealing with software companies like Microsoft Corp.

Intel’s stock fell 1 cent to $23.98 in late-morning trading Thursday after the announcement.