Intel: CEO Paul Otellini Stepping Down Spells Opportunity

| About: Intel Corporation (INTC)

Intel (NASDAQ:INTC) announced its current CEO, Paul Otellini, will retire in May. The company will focus on finding a new CEO during that time period, with Otellini and board chairman Andy Bryant leading the search. Given the recent weakness in the firm's share price, many seem to suspect that Otellini's hand was forced by the company's inability to become the dominant mobile technology player.

Though we view this criticism as valid, we doubt Otellini's exit was anything more than a planned retirement. During his tenure, he oversaw several billions of dollars in earnings growth, helped grow the company's data center business, made a savvy acquisition in McAfee, and returned billions of dollars to shareholders. Nevertheless, mobile continues to be the bane of Intel's existence, as it has failed to supplant Samsung as the major chip supplier for the iPhone and iPad (NASDAQ:AAPL). Rumors circulating about Apple's desire to remove Intel from the Mac architecture have also not helped recent share performance.

However, we believe both fears are overblown. Apple won't replace Intel as long as it makes the best PC chips - which it does. We also think Apple would love to replace Samsung, its bitter smartphone rival, in its phones, and we think once Intel provides a suitable chip, the odds of replacing are in its favor. The market also seems concerned about the PC and rightly so. Early speculation suggests Windows 8 (NASDAQ:MSFT) hasn't been the savior Microsoft asserted it would be, but the PC is not completely dead by any means. Microsoft has mostly blamed its OEM partners for a lack of innovation, but the fiscal cliff and hardware-reliability improvements has crippled business demand (in the near term). But we think enterprise technology investment could reverse the downward trend (in the long term). Thus far, we haven't seen evidence to suggest that enterprise demand for PCs will be usurped by tablets.

Intel's new CEO will have some challenges, namely creating the best mobile chip on the market in order to gain market share, and hopefully, a spot in the Apple ecosystem. However, Intel's data center business remains fantastic, its software business has been performing well since acquiring McAfee, and the company remains the leader in PC chips. We continue to like the company and think the valuation and dividend yield create an intriguing total return opportunity. We continue to hold shares in the portfolio of our Best Ideas Newsletter. The company has tremendous valuation upside potential, which we outline in this article here.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

Additional disclosure: The firms mentioned in this article are included in our actively-managed portfolios.