Intel (NASDAQ:INTC) lifer Brian Krzanich was named the company's new CEO today, but that's not the big news here. The bigger news is the appointment of Renee James as president. You should focus on her previous job, as she was in charge of software. Also, she's not an Intel "lifer," having come to the company with Bell Technologies 25 years ago.
Intel's biggest problem is that hardware is becoming software. Software defines hardware, and chips have to conform to what companies want their software to do. This means chips have to be custom-designed around the devices they're going into.
In practice, this has caused Intel to lose a ton of deals, because it focused first on the hardware and then on adapting it, which is backwards. It doesn't matter how many watts an Intel design uses, as opposed to a chip based on an ARM Holdings (NASDAQ:ARMH) design. The ARM chip has been customized to the device and the Intel chip can't be, so ARM gets the deal every time.
Krzanich has been focused on the production side of the house, on Intel's foundries. James has been focused on creating designs and ordering them. The way is now clear for the two sides of the house to be functionally divided, so that even if Intel isn't split up in fact, it can be in practice.
Under the old regime, the CEO and president were the same person. Now they're two different people with different agendas. James has worked as an independent director with VMware (NYSE:VMW), so she understands cloud and the coming Internet of Things. As a director of Vodafone, and the company's point person on devices, she is into the big growth opportunities Intel has been missing. Now, as president -- and part of a two-person "office of the president" alongside Krzanich -- she has the power to demand the customization needed to win some big deals.
What investors need to look at now is Intel's relationship with Apple (NASDAQ:AAPL). Apple uses an ARM-based design, which is a problem for Intel. But Apple has a bigger problem in that its key supplier here is Samsung, which is its chief rival in the device business. Intel has been reticent to deal with Apple -- Otellini considers it a competitor. That's going to change, and the degree to which it changes will tell us a lot about whether the new Intel can succeed. I'm open to the idea of buying Intel if James can make progress on the relationship. I sold out that position last year and have been happy with its replacement in my portfolio, ARM.
In the past few weeks there has been some talk that Apple might actually buy Intel. I don't think that's in the cards, but the relationship needs to develop for the future of both companies. If James can get the iPhone or iPad business away from Samsung (OTC:SSNLF) and into Krzanich's foundries, this move is a success. If she can't, Intel will continue to flounder. The point is that she now has the power to do a deal. The point is someone may have the power.
Disclosure: I am long AAPL, ARMH. 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.