by Tom Taulli | November 19, 2012 12:18 pm
Intel (NASDAQ:INTC) CEO Paul Otellini announced today that he’ll retire in May. While it came as mostly a surprise — because he’s only 62 — the move is much needed.
Otellini came on board Intel 40 years ago and became CEO in 2005. But since then, the stock price has gone from about $24 to $20.
The fact is that Otellini failed to make the transition from PCs and laptops to smartphones and tablets. Rather, other companies such as Qualcomm (NASDAQ:QCOM), Samsung and ARM Holdings (NASDAQ:ARMH) took the lead in these burgeoning new markets.
It’s true that Intel has recently launched a variety of mobile chips — but this comes very late. The company’s global market share is below 1%.
At the same time, Intel is feeling the pressure from the slowdown in the PC market. And it may be a secular trend. Barclays analyst Ben Reitzes forecasts a PC sales drop of 3% in 2012 and 4% in 2013. He says the deterioration will continue “for years to come.”
Not surprisingly, Intel has been posting meager results. In the third quarter, revenues fell by 5.5%, and profits were off by 14%.
Despite all this, Intel can still get things back on track. The chipmaker has a massive global distribution footprint, world-class engineers, state-of-the-art fabrication plants and large cash flows. Intel should be able to create great mobile chips, right?
But it will require new leadership — probably someone from outside the company and who has extensive mobile experience. In fact, Intel is seriously considering this possibility.
Yet finding the right CEO and making the needed strategy changes will take time. Unfortunately, Intel’s competitors will continue to gain traction and get more entrenched. So, for the next couple years, it’s still likely that the company’s stock price will remain a laggard.
Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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