Intel announced today that CEO Paul Otellini will leave the company in May 2013 a timeframe that will mark 8 years in the position and 40 years with the company. At the surface, one may view the departure as a natural transition given his tenure. In my view, Otellini’s departure speaks to an underlying competitive shift in the processor landscape that Intel has failed to exploit.
It’s no secret that smartphones, tablets, e-readers and other popular device categories do not rely on the x86 processors that Intel has enjoyed monopolistic power for decades. It’s ironic that Otellini’s tenure began with a bang when Steve Jobs announced that in the summer of 2005 that Apple would transition it’s Macintosh computers away from the PowerPC platform to Intel’s x86 processors. The irony stems from the fact that the Intel-Apple partnership didn’t lead to increased processor collaboration between the two firms as Apple’s main revenue generator, iOS devices, run on the competing ARM platform.
The rise of mobile devices using low-power ARM processors and the mobile consumer / enterprise have left Intel behind the mobile platform curve. The ARM momentum shows no sign of slowing down, in fact it’s accelerating. I argue that Otellini’s departure stems from his inability to position Intel to identify and take advantage of the mobile shift. Intel’s scale and inertia are the likely culprits. This isn’t necessarily Intel’s fault, it’s simply a function of how a large firm tends to focus on efficient operations, satisfying Wall Street, and appeasing current customers. Innovation takes a backseat as the company’s activities are not aligned with changing the status quo.
Smartphones, tablets, and other device types aside, industry trends don’t bode well for Intel. Apple’s Mac OS X operating system has been rumored to one day make the shift to the ARM platform. Microsoft Windows 8 also runs on ARM. Overtime, you’ll see these two companies offer products that leverage the same processor architecture as the use case speaks of consistency, interoperability, and lower development costs. This is what the consumer now expects across their devices and software. Apple, Microsoft, and Google are scaling out their hardware and software portfolios with this strategic focus, a trend that is a danger to Intel’s market position.
Will Intel find it’s way into those business school cases as an example of a company that was so slow to read the tea leaves that it eventually died a slow death at the hands of an industry that was experiencing a platform revolution? ARM is where the action is and it’s where the innovation is occurring. So what will Intel do? Does Otellini’s departure mark the beginning of the fix or the beginning of the end? I argue for the latter.