Blame the mobile and BYOD revolution for Intel chief's ouster

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Intel has failed to keep up with the shift in the market away from desktop PCs -- a market it has long dominated -- and now its CEO is out because of it.

This morning the company announced that Paul Otellini, Intel's CEO who has been with the company for nearly 40 years, will step down in May. Intel said the board will look internally and externally for a successor.

A change in leadership could help Intel respond better to the growing demand from workers to choose their own tablets, mobile phones and other devices to do their jobs.

A look at growth in semiconductor vendors this year shows just how much Intel is falling behind. Ranked by sales (revenue) growth this year, GlobalFoundries is number one with an expected 31 percent growth rate this year over last, according to IC Insights. Intel is ranked number nine, with a decline of 1 percent year over year.

GlobalFoundries manufactures X86 chips, like Intel, as well as those using the competitive ARM architecture. But overall, market sales of X86 chips have been declining rapidly, suggesting GlobalFoundries' growth is coming from ARM chips. Intel is still number one in sales, far dominating the volume that GlobalFoundries is selling. But the gap in growth rate between the companies shows how dramatically the market is shifting.

ARM-based chips dominate the mobile tablet and phone markets, and with more workers using tablets and mobile devices of their choosing instead of desktop PCs, Intel's growth is slowing.

One of the clearest signs of the shift in the market was when Microsoft began developing a version of its Windows 8 operating system to run on ARM chips, since Microsoft has always run its OS on Intel's architecture. Microsoft's decision to do so was another sign that Intel wasn't able to produce the kind of products that end users were demanding.

"[Intel has] tried many avenues through acquisition or internal but their image is so locked in with the PC and desktop, I'm not sure they've been able to quickly and readily adapt to the fast paced mobile environment," said Brian Matas, vice president of market research at IC Insights, semiconductor market researchers.

Intel has had some successes, such as with its Atom processor and the ultrabook market but it's still early and those products have been met with mixed reviews, Matas said.

It has also started to make some very modest headway in the mobile phone market.

The company also has made progress leveraging its manufacturing strength to make smaller parts that run on less energy, Matas said. "That's been good for them but when it comes to taking another step and keeping pace with the development going on in the smartphone and tablet markers and getting key design wins in those areas, they still don't seem to be moving ahead as rapidly as ARM," he said.

In order to catch up, Intel will need a new leader that knows the consumer and mobile markets well and will help it better respond to the shifting market. That's a tall order and Intel is already behind so the new leader will need to move decisively and quickly.

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