The Santa Clara, Calif.-based semiconductor maker has had only five CEOs in its 44-year history, all chip pioneers and engineers until Otellini, now 62, whose prior career was more in marketing and sales.
“It's time to move on,” Otellini said. Intel Chairman Andy Bryant, himself a former CFO, said the company will consider successors from inside and outside the sprawling chipmaker. Intel has never had an outsider as CEO.
The retirement announcement comes in a challenging period for the semiconductor industry, where growth is laggard and even Intel has reported declines in year-over-year profit.
A hoped-for refreshment of the chip cycle based on demand for its Ultrabook chips for mobile products and the new Windows 8 from Microsoft Corp. (Nasdaq: MSFT) hasn't yet triggered big demand for new PCs, laptops and servers.
Rival Qualcomm (Nasdaq: QCOM) of San Diego, the leader in mobile chip design, has already said more than 100 Asian manufacturers have agreed to deisgn its Snapdragon chips into new laptops and tablets, a new marker for Qualcomm. Qualcomm's market capitalization of $106 billion is now about $6 billion more than Intel's value.
The market also hasn't been good to Intel shares. They fell 3 cents to $20.16 in late Monday trading. They're off 18 percent this year as well as for the past 52 weeks.
The company announced it was promoting three executives who are well regarded, which could mean they will be contenders to succeed Otellini, who was expected to remain until he turned 65.
They are Stacy Smith, the CFO and director of corporate strategy; Renee James, head of Intel software, and Brian Krzanich, the COO and head of worldwide manufacturing. All three were promoted to executive VP. That could put them on a short list for the CEO suite.
Intel already had three executive VPs, also well-regarded people. They are Sean Maloney, who oversees manufacturing and sales in China; David Perlmutter, who oversees all design architecture, and Arvind Sodhani, who''s also president of Intel Capital, the in-house venture capital arm that has invested more than $10.7 billion in 1,250 companies worldwide since 1991.
Analyst Vijay Rakesh and Sterne Agee immediately suggested Maloney would be on the short list for CEO but also suggested the company "could do a reboot with new blood from outside."
At Piper Jaffary, analyst Gus Richard said that while Otellini had done a good job, "In many cases it is not a positive sign when a CEO leaves."
Whoever succeeds Otellini will step into a position held by semiconductor legends including the late Robert Noyce, as well as Gordon Moore, Andrew S. Grove and Craig Barrett. Noyce at a predecessor company, Fairchild Semiconductor, is credited as a co-inventor of the integrated circuit along with rival John Kilby of Texas Instruments Inc. (Nasdaq: TXN), the No. 2 U.S. chipmaker.
Otellini oversaw major expansion of Intel's manufacturing operations with new plants in China, Costa Rica and Vietnam, as well as bolstering existing manufacturing in the U.S. and Israel.
Earlier this year, he also directed Intel to acquire a minority stake in ASM Lithography (Nasdaq: ASML), a Dutch maker of chipmaking equipment to ensure next-generation technologies.
Intel's market capitalization is $100.2 billion.