Intel Hands Otellini the Heir Shirt - TheStreet

The post-PC era is here, and

Intel

(INTC) - Get Report

is gradually changing with the times.

The world's leading chipmaker Wednesday appointed Paul Otellinias heir-apparent to CEO Craig Barrett. Otellini, 51, formerly the head of Intel's core microprocessor business, takes the No. 2 job as president and chief operating officer. This puts Otellini in charge of such things as new product development and business efficiency.

Observers see the move as relieving the well-regarded Barrett, 62, from many of the day-to-day activities and as he takes on more of a corporate strategy and rubber-chicken circuit role.

Intel has been pouring resources into areas beyond the PC chip business, which it dominates. The company has made several acquisitions and no secret of its interest in communications chips, particularly in optical networking.

"Paul has been a great advocate of expanding Intel's architecture beyond the desktop, and he's done a good job of implementing that strategy over the past year," says UBS Warburg analyst Tom Thornhill, who has a buy on the stock. Warburg has no banking ties to Intel.

Otellini was one of 28 Intel vice presidents and has worked for the company 28 years. Prior to taking the position of president, which was created for him, he oversaw the Intel Architecture Group, a $21 billion business annually.

"As Intel's silicon products span beyond PCs and servers to communications, the job of keeping Intel at the competitive forefront with customers, the industry and government, and in internal operations, has grown," Barrett said in a press release.

Warburg's Thornhill, who has followed Intel since the '80s, says Otellini was destined for the job, having managed Intel's core business.

Intel mildly beat fourth quarter earnings expectations Tuesday, but projected flat to 8% down sales for the coming first quarter. Cost-cutting will definitely rank among Otellini's top jobs if the outlook doesn't improve for the chipmaker.

In September, Barrett

told employees that revenues were shrinking faster than worker headcount, signaling that further cuts could be in store. As Barrett said in that September memo: "It is very important to note here that our current headcount is some 20,000 employees higher than it was two years ago, when our revenues were about the same level as today."

Intel representatives were unavailable for comment.

Thornhill, who views Otellini's promotion as very positive for the company, says the outlook for Intel has improved since then and that cuts may not be the first order of business.