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Intel Names Brian Krzanich CEO

Zacks Equity Research

The world’s largest manufacturer of semiconductor products, Intel Corp (INTC) recently announced the appointment of an internal expert, Brian Krzanich, as its new chief executive officer, effective May 16, 2013.

The 52-year old Krzanich joined Intel in 1982 as a process engineer. He climbed the ranks over the years and was appointed as the COO in Jan 2012.

Krzanich will now be Intel’s sixth chief executive and will take his position at the company's annual shareholder meeting on May 16, replacing Paul Otellini. Effective May 16, Krzanich's base salary will increase from $700,000 in 2012 to $1 million annually. Additionally, he will receive new equity awards valued at $2 million.

According to sources, some investors were hoping to see an outsider as the new CEO as some aggressive moves could help Intel catch up with the mobile revolution. Hence, Krzanich’s appointment upset a few of them.

Despite being one of the largest chipmakers, Intel’s main business of making processors for PCs is seeing sagging demand. This can be attributed to the increasing customer shift toward tablets and hybrids. Though Intel is well ahead of its closest rival Advanced Micro Devices (AMD), its new products and even Ultrabook laptops have so far failed to excite consumers. The majority of gadgets run processors based on rival ARM Holdings Plc's (ARMH) power-saving chip architecture.

Therefore, in order to expand the company’s bottom line, we believe Krzanich will have to find ways to move beyond the traditional computer industry.

Krzanich said that he would help move Intel chips beyond computers and mobile devices into more novel fields, including wearable technology. The focus is on identifying future product needs and increasing revenue base, rather than aiming at existing smartphones and tablets.

The company hopes that Krzanich will be able to generate fruitful results with his wide experience in manufacturing technology. We believe Krzanich's appointment comes at a crucial time for the company, which is gearing up for a transition to larger wafers. The company is also gearing up to ship its next-generation processor, Haswell, which is expected to be Intel’s first major success in the mobile segment.

Intel has a strong market position and technology lead, and continues to show solid execution. Though the company’s recent results have been impacted by the weak PC market, we believe Krzanich’s expertise should help Intel to get back on the growth track.

Intel shares carry a Zacks Rank #3 (Hold). Another stock in the sector that is performing well currently is Stmicroelectron (STM), which carries a Zacks Rank #2 (Buy).

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