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11/20/2012
08:09 AM
Paul McDougall
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Otellini Exits Intel, With Windows 8 Fate Uncertain

During Otellini's tenure, Intel was caught flatfooted on the shift to mobile computing. Early Windows 8 launch results don't show a Wintel win, either.

Intel CEO Paul Otellini announced Monday that he would step down, but gave no explanation for the surprising move. It's the Wintel camp's second big loss in a week, as Microsoft Windows chief Steven Sinofsky left the company on Nov. 12. At a time when both vendors are struggling to gain share in the smartphone and tablet markets, the departure of two high-profile execs may be no coincidence.

Otellini's pending goodbye appears to be on better terms than Sinofsky's. Microsoft issued a tersely worded statement last week that said Sinofsky, who led the development and launch of Windows 8, had left the company "effective immediately."

Intel is headed for a more orderly transition. "Paul Otellini has been a very strong leader, only the fifth CEO in the company's great 45-year history, and one who has managed the company through challenging times and market transitions," said Andy Bryant, chairman of the board, in a statement. "The board is grateful for his innumerable contributions to the company and his distinguished tenure as CEO over the last eight years."

Otellini returned the compliment: "I've been privileged to lead one of the world's greatest companies," he said. "After almost four decades with the company and eight years as CEO, it's time to move on and transfer Intel's helm to a new generation of leadership. I look forward to working with Andy, the board and the management team during the six-month transition period, and to being available as an advisor to management after retiring as CEO."

Still, despite the different tones, one can't help but wonder if Sinofksy's and Otellini's fates were connected. The current Windows 8 launch period is somewhat confused, with debut dates still undetermined for a number of key products. Part of that is Microsoft's doing. Its vagueness about the release of Surface Pro (it will only say that it will be available within about 70 days), the version of Surface that will actually run standard Windows applications, has many would-be buyers stumped.

Meanwhile, a whole new class of Wintel tablets, a category of devices that was supposed to put Microsoft and Intel on an even footing with Android and the iPad, can scarcely be found. Those are Windows 8 tablets that run on the new Clover Trail edition of Intel's Atom architecture. Clover Trail was designed to bring the best of both worlds to Wintel and allow it to leapfrog competition from the ARM camp. Clover Trail is supposed to deliver all day battery life and up to 30 days of standby power, while running the full complement of Windows applications.

But the chip is late, and there is still no launch date for some systems that use it. Others, like the HP Envy x2, have all but missed the holiday shopping season. HP said as recently as last month that the tablet, a Windows 8 convertible, would be available on Nov. 14. Now it is offering a ship date of Dec. 19. HP, the world's largest seller of Wintel systems, said Tuesday that fourth-quarter PC sales fell 14% from the previous year. The company posted a loss of $6.9 billion.

Beyond production hiccups that have hurt partners, the larger point is that Otellini has been at the helm of Intel for the past eight years, when the industry turned increasingly mobile and the chipmaker was caught flatfooted. The chief beneficiary of Intel's paralysis was ARM Holdings, whose mobile chip design can be found in the vast majority of Android devices, not to mention the iPad and iPhone. Reports that Apple may be looking to replace Intel with ARM chips on the Mac surely didn't help Otellini's position.

The near-simultaneous departures of both Otellini and Sinofsky may also be an indication that the early numbers are in on Windows 8 system sales, and that it's not going well. We won't know for sure until after both companies release their year-end numbers, but thus far Microsoft has been mum on sales data, which is never a good sign.

Topeka Capital Markets analyst Brian White said Monday that his checks of the Asian supply chain revealed that Windows 8 is off to a slow start. "Much lower than...PC makers originally expected a few months ago," said White, in a report. Also Monday, Deutsche Bank cut its estimate for PC sales in the current quarter, due to "lackluster initial uptake of Windows 8," according to analyst Chris Whitmore.

Clearly, it's time for new blood at both Intel and Microsoft, which begs the question of how long Steve Ballmer will remain at the top in Redmond. If Windows 8 bombs, his departure could come sooner rather than later.

Upgrading isn't the easy decision that Win 7 was. We take a close look at Server 2012, changes to mobility and security, and more in the new Here Comes Windows 8 issue of InformationWeek. Also in this issue: Why you should have the difficult conversations about the value of OS and PC upgrades before discussing Windows 8. (Free registration required.)

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melgross
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melgross,
User Rank: Ninja
11/23/2012 | 3:41:33 PM
re: Otellini Exits Intel, With Windows 8 Fate Uncertain
Maybe if they didn't dump X-Scale, and instead focussed on making them leaders in the industry, they would hold a major marketshare position in the mobile market now. No matter what happens with Win 8, it won't match the mobile scene, which will continue to be dominated by ARM.

But even Apple has made what possibly could be seen as a mistake by dumping their 40% ownership share of ARM a decade ago.
cbabcock
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cbabcock,
User Rank: Author
11/20/2012 | 10:21:38 PM
re: Otellini Exits Intel, With Windows 8 Fate Uncertain
Intel was good at creating variations on the Xeon, including energy-modulated versions. Otellini understood the "cloud server" shift. But low energy-consuming Intel Atom doesn't yet appear to be competing with ARM in mobile.
AustinIT
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AustinIT,
User Rank: Apprentice
11/20/2012 | 6:36:30 PM
re: Otellini Exits Intel, With Windows 8 Fate Uncertain
One of the problems with companies that have "a good thing going" is that they become complacent. Mobile devices have been around for a long time now but anyone with any business sense should have recognized that the blitz was coming... and that they needed to be ready for it. It appears that nearly everyone but Apple missed the starting gun.
codemonkey
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codemonkey,
User Rank: Apprentice
11/20/2012 | 6:24:07 PM
re: Otellini Exits Intel, With Windows 8 Fate Uncertain
Back in 2000 (when PDA's were hot and before touch driven smartphones existed) they were working on mobile reference designs using XScale (an ARM based design, http://en.wikipedia.org/wiki/X..., which they subsequently sold to Marvell in 2006 because they wanted to focus on X86.

Maybe if they had dumped XScale sooner and REALLY focused on low power X86 they would have something by now. However I wonder what percentage of the mobile market they would have now if they had pursued XScale.

Another issue for Intel has been that they have enjoyed healthy margins on their chips and I think the mobile space is far too cutthroat for them - the model being large volume at small margins. Intel has always seemed to try and stay at the high end of the market which does not really exist in the mobile space. While the PC market is stagnant, they at least still have a reasonable lock on gaming, workstation PC's and servers (which is growing).
ArtWittmann
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ArtWittmann,
User Rank: Apprentice
11/20/2012 | 5:49:40 PM
re: Otellini Exits Intel, With Windows 8 Fate Uncertain
It's a good point, Eric. ARM's market cap is about half of what Intel's is as present. I'd retire too. Intel's going to have to think very differently about its business.
EricLundquist
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EricLundquist,
User Rank: Apprentice
11/20/2012 | 3:13:09 PM
re: Otellini Exits Intel, With Windows 8 Fate Uncertain
And Otellini's departure comes about a week after Qualcomm surpassed Intel in market value.
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