Since becoming Intel's CEO four years ago, Paul Otellini has presided over one of the most dreadful periods in the Santa Clara chip maker's history.
When he took control of the company, it was staggering from a string of questionable business ventures and product missteps, and its once high-flying stock began to sag. Then its sales practices came under increasing regulatory scrutiny, recently resulting in a $1.45 billion European antitrust fine. As if that weren't enough, it got body slammed by one of the nastiest recessions ever.
The company's woes have been deeply worrisome for more than just Intel. Because the semiconductor giant's fortunes are considered a key barometer for the tech industry, when it stumbles, the reverberations can be felt worldwide. But analysts give Otellini high marks for steadying the firm and putting it on a path to emerge from the downturn stronger than it's been in years.
"He has definitely brought a hungrier, leaner attitude," said Christopher Danely, of J.P. Morgan. "Otellini came in and said, 'This is BS, let's get back to business.'"‰"
It hasn't been easy for the soft-spoken, 58-year-old Otellini, who declined to be interviewed for this report. By the time he took the reins in May 2005, Intel, the dominant supplier of brainy x86 microprocessors for personal computers, faced slowing PC sales
and mounting concerns about the company's ability to grow. His predecessor, Craig Barrett, had run into problems trying to branch out, and Otellini was responsible for getting the company back on track.
While highly praised for improving Intel's manufacturing operations and keeping the company profitable, Barrett spent more than $10 billion trying to expand into communications and consumer electronics, attempting to make everything from digital cameras to MP3 players. One failure followed another.
Meanwhile, Intel began to lose its edge against its primary microprocessor competitor, Advanced Micro Devices of Sunnyvale, and had trouble delivering new chips on time. Things got so bad that during a 2004 industry gathering, Barrett got down on his knees to offer an apology.
"Otellini inherited a mess," said Rob Enderle, a technology analyst with the Enderle Group in San Jose. Aside from the company's precarious early years, "it's probably the toughest time Intel has had."
As Intel's fifth CEO, Otellini was the only one without a doctorate and technical expertise, which is said to have disappointed some Intel engineers. But he was well schooled in its commercial operations. Armed with an MBA, he had worked at Intel since 1974, managing several units, including global sales, and later holding the positions of president and chief operating officer.
Some experts say that made him the perfect choice to steer the company on a new course.
"In the early phase of the industry, it's all about technology," said Roger Kay of Endpoint Technologies Associates. "But as things get going, it's more about packaging and product development, market-oriented stuff. So the type of background he had is appropriate to the job that needs to be done now at Intel."
The new CEO wasted little time refocusing the company.
"What Otellini has done is gone back to Intel's basics and expanded the company from its strength in terms of building x86-based microprocessors," said Nathan Brookwood, a research fellow at Saratoga market consulting firm Insight 64. Otellini also improved Intel's chip development, Brookwood noted, adding, "they went from having processors that were marginal in terms of their performance to processors that are now leading the industry."
Under Otellini's stewardship, Intel has made a big push to get its chips — especially its energy-efficient, low-cost Atom microprocessor — into other products, such as cell phones. It also has continued its long-standing commitment to make chips with increasingly tiny circuitry to boost the gadgets' performance, announcing in February that it will invest $7 billion to build state-of-the-art factories.
At the same time, however, Otellini has launched a cost-cutting campaign that has shuttered other plants and scaled back the company's global work force from about 103,000 in early 2006 to just over 80,000 today.
Not everything Otellini has done has met with cheers. That includes his more-than $1 billion investment in a wireless broadband technology called WiMax, which some analysts suspect may wind up a flop, and Larrabee, a graphics-oriented chip that critics contend has taken too long to develop.
Some also consider Otellini's quest to get into the cell phone market risky. Other potential pitfalls include the ongoing investigations of Intel's marketing practices by the Federal Trade Commission and New York state, and a related antitrust suit filed against it by AMD, which goes to trial next year.
But all in all, analysts say, Otellini's record so far has been impressive.
"About three years ago, half the Street was calling for his head" said Hans Mosesmann of Raymond James & Associates. Today, he added, "I'd give him very high grades. B-plus, A-minus. Pretty darn good considering all the stuff he inherited."
