Intel’s next chief executive really can’t afford to be a chip off the old block. The semiconductor giant’s shine has dulled with the rise of mobile. Being surpassed by Qualcomm in market value earlier this month illustrates the significance of the shift. Whoever replaces boss Paul Otellini will need to find a way to tackle smartphones while simultaneously playing tougher defence.
Mr. Otellini, whose retirement at 62 next May was unexpectedly announced on Monday, is at least leaving behind some strong cards. The rise of cloud computing means consumers and businesses are storing more data remotely. That calls for a lot of servers, mostly running Intel chips, in the background. Intel also has a manufacturing edge when it comes to designing the smallest microprocessors, which means it can make more powerful ones and often at a lower price per chip.
But if only the paranoid survive, Intel has much to worry about. Having largely missed mobile doesn’t only means investors have forsaken tremendous riches: rivals Qualcomm and ARM Holdings have seen their market values balloon as Intel’s has shrunk. The dynamic also threatens Intel’s existing lucrative business.
Revenue growth is stalling as consumers pick tablet devices without Intel inside. At the same time, the chip maker’s rivals are increasingly eyeing a move into Intel’s server business by selling power-sipping chips, which could be an advantage to data centres eager to cut their huge electricity bills. The two trends combined present a potentially serious problem for Intel. Because chip-making plants are so expensive to run, just a small fall on the top line would lead to a big one on the bottom line.
Moreover, Intel’s latest hope in mobile – tablets running Microsoft’s newest operating system, Windows 8 – is looking grim. Since the middle of the summer, Intel’s market value has tumbled by about a quarter. And the growth in the number and complexity of mobile devices means rivals grow stronger with each passing day.
Mr. Otellini, who has worked for the company for almost 40 years and ascended to the top job in 2005, isn’t set to leave till May and Intel says it is looking inside and out for a successor. But time isn’t on the side of the company or its next CEO.