Intel Succession May Not Be Smooth

| About: Intel Corporation (INTC)

Intel (NASDAQ:INTC) stunned markets this morning by announcing that CEO Paul Otellini will retire early, stepping down next spring. The company maintains a retirement age of 65, but Otellini is still 61.

More telling is that the company announced it will do a search for a new leader, rather than automatically promoting COO Brian Krzanich, the manufacturing head who was named to his present position in January.

To me this says Intel is taking seriously a lot of recent criticism of the company by analysts and even me. My point has been that Intel has a big problem in devices, things like phones and tablets, and these markets require a different approach, one for which Intel is not built.

It's possible that this announcement is a head fake, that an orderly transition to a manufacturing guy is planned, and that there is merely something going on with Otellini's health - physical, mental or spiritual - that has him wanting an early exit. It may be that Intel's board was taken aback at this decision, and merely wants a little time to compose itself before naming Krzanich to a job that, in an orderly Intel world, would be his by right.

Intel has a 10-member board with two insiders - Otellini and chairman Andy Bryant. The board includes two former members of the Clinton Administration - trade negotiator Charlene Barshefsky and FCC chair Reed Hundt - along with two academics - James Plummer of Stanford and David Yoffie of Harvard. There are two from the corporate world - eBay (NASDAQ:EBAY) COO John Donahoe and former Yahoo (NASDAQ:YHOO) executive Susan Decker, as well as two venture capitalists - David Pottruck and Frank Yeary.

That board will now be tested, and Intel shareholders will be watching closely to see if they pass the test. Are they willing to engage on a new direction for the company, which might include a break-up between manufacturing and chip design/marketing. Or are they only willing to go through the appearance of thinking different, and will in the end accept the current direction of drift?

Stay tuned.

Disclosure: I am long INTC but recently reduced my holdings considerably. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.