This is rehash of what we all know except RBC adds its opinion.
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1:11 PM
INTC: Otellini’s Successor Most Important Decision in Years, Says RBC
By Tiernan Ray
Intel COO Brian Krzanich is among those that media reports have short-listed to replace CEO Paul Otellini when he departs next month.
RBC Capital chip analyst Doug Freedman today reiterates a Sector Perform rating on shares of Intel (INTC), and a $24 price target, reflecting on the short list of people who might replace CEO Paul Otellini when he steps down next month, names he’s mostly culled from media speculation.
‘Currently, the lack of CEO succession is a huge issue for our investment thesis,” says Freedman, calling it the company’s “most important decision Intel has made since 300mm.”
“We need to have a firm grasp on the direction the new CEO is targeting before we are able to offer conviction for large scale investment.”
With 14% of total chip sales globally every year, Intel’s choice of successor is important for the entire industry, opines Freedman.
He thinks Otellini’s replacement must excel at building areas such as mobile and software, to move the company beyond the PC:
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; we believe this is in mobile and software. 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).
The candidates may include outsiders, such as former Motorola Mobility CEO Sanjay Jha, former ARM Holdings (ARMH) CEO Warren East, and VMware (VMW) CEO Pat Gelsinger.
As for insiders, the list includes COO Brian Krzanich; CFO Stacy Smith; chairman Andy Bryant; software lead Renee James; Intel Architecture director David “Dadi” Perlmutter; and PC client technology director Kirk Skaugen.
Following three internal appointments — Otellini, Craig Barrett, and Andy Grove, “this time could be different,” thinks Freedman.
Without opining on the merits of the individual candidates, Freedman gives his take on the inside/outside decision:
In our view, an internal candidate pick would likely be viewed as ‘steady as she goes’. We surmise that his/her respective group will be validated as an important piece (and perhaps focal point) of Intel’s future. Conversely, an external pick would likely come from a mobile or customer-centric background. We highlight that the candidate’s age is relevant as Intel implements forced retirement at age 65. That said, market perception of a candidate at or beyond their late-50s may be viewed as less transformational.
Intel shares today are up 61 cents, or 2.8%, at $22.36.
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