March 26, 1998 6:00 PM PST

Intel's line of succession

SANTA CLARA, California--If the predictions of current and former employees hold true, not much will change in the driven corporate culture of Intel after Craig Barrett takes over as chief executive.

He and his legendary predecessor, Andy Grove, are known as the "dynamic duo" on Intel's campus here, the only significant difference between the two men being Barrett's gravity toward detail and Grove's propensity to view the big picture. Both are regarded as talented executives but also as taskmasters to the rank and file.

In the absence of short-term political concerns, another question has emerged: Who's next in line?

"The real question is, 'Who is behind Barrett?'" said Peter Kelly, managing partner at the Los Angeles-based executive search firm Rollo Associates. It is likely that Intel is grooming the next generation of the executive team by training 10 or 20 executives in the day-to-day operations of the company, he said, as well as in building a relationship with Wall Street.

It may seem premature to guess who is going to succeed Barrett as chief operating officer, See special coverage: Intel's changing of the guard let alone as CEO, since he was just named to the job today. But analysts point out that the small age difference between Grove, 61, and Barrett, 58--just three years--makes reading Intel's corporate tea leaves a worthy exercise. The choice of successors will be crucial in helping to shape the direction of Intel in a rapidly changing market.

Those decisions have become even tougher because the pool of candidates has shrunk since Barrett was promoted to chief operating officer and then president, making him the heir apparent to Grove. At that time, a number of executives, including former senior vice president and general manager of the enterprise server group, David House, left Intel for greener pastures.

Analysts mention Paul Otellini, 47, executive vice president and general manager of Intel's architecture business group, as one possible candidate to succeed Barrett. About 15 executives, including Otellini, now report directly to Barrett, including Jerry Parker and Frank Gill, the company's two other executive vice presidents.

"Otellini might be next in line if the COO slot needs to be filled," said Ashok Kumar, an analyst with Piper Jaffray. "He stands heads and shoulders above the competition. He's close to Andy, too, and that's important because Andy is the one who picked Barrett as the golden child."

In late 1996, just weeks before the company announced that Barrett, then COO, would add the title of president to his business card--a move seen as the precursor to today's announcement--three Intel executives resigned. House stepped down to become chief executive at Bay Networks (BAY), which also hired Dave Shrigley, an Intel marketing executive. Carl Everett Sr., a senior vice president and a general manager of Intel's desktop products group, also announced his departure.

"I don't think anything really changes [at Intel]," House said, adding that Barrett and Grove are "the dynamic duo."

"At one point I did see myself as CEO," said House, who worked at Intel for 22 years. "Andy said in 1991 that he wanted to retire in 1993, but when Andy decided not to retire, it was time for me to go run my own company."

When it becomes more clear who is in the group of potential successors to Barrett--and who is not--more executives are likely to leave the company, Kelly said.

"They prepare [a group of executives to take on] the duties of a CEO, and the closer they get to making that decision, several will realize that they won't be CEO, and they will go be CEOs at smaller companies," Kelly said.

For the time being, the Intel campus is ready to embrace Barrett.

"This is a recognition of Craig's role. Andy is focusing his full time on strategy," said Mike Aymar, vice president and general manager of the consumer products group at Intel.

The transition should be smooth because Barrett, for the most part, already has been running the company's day-to-day operations.

At Intel's headquarters here in the heart of Silicon Valley, the rank and file were not surprised by Barrett's promotion.

"Old news," said employee walking her daily two laps around the campus on her lunch hour. "Things will go pretty much the same way as they always have."

"It's a natural progression," added an Intel engineer, noting that he was "slightly saddened" by the transition. "Andy is a legend," he said.

Other workers noted that Barrett is experienced in Intel's persistent, "in-your-face" corporate culture.

"[Grove and Barrett] have the same mindset," said another engineer, who has been with Intel 2-1/2 years. "I'm sure Andy has passed on the legacy and culture. Barrett has been very operations-oriented."

As Kelly summed it up: "Intel and Grove have planned a process and a culture that emphasizes discipline, and Barrett is part of the fabric of that. Intel is the example that many companies would want to follow. So why would anyone want to change that?"

Tim Clark reported from Santa Clara. Suzanne Galante and Jim Davis reported from San Francisco.

 

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