Today: Intel (INTC) chief Paul Otellini surprisingly announces retirement more than two years early, which could lead to first outside CEO hire in company's history. Also: Apple (AAPL) jumps more than 7 percent as Wall Street recovers from post-election malaise, and Cisco (CSCO) pays big money for S.F. wireless outfit.

Intel CEO to depart early, chipmaker begins search for successor

Intel announced Monday morning that CEO Paul Otellini will step down in May, two-and-a-half years earlier than expected, a surprise move that could lead to the Santa Clara chipmaker hiring an outside executive as its leader for the first time in its history.

Otellini reportedly decided on his own to step down before the typical retirement age for an Intel CEO, which is 65; Otellini turned 62 in October. Intel spokesman Paul Bergevin said "the decision was entirely Paul's. The board accepted his decision with regret."


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Intel Chairman Andy Bryant told Barron's that he tried to talk Otellini out of it, but the CEO was ready to step down and allow a new leader to face the future challenges Intel must confront.

"We do have big issues in front of us, moving to the tablet and phone markets, and he was ready to let the next generation lead those battles," Bryant said.

While Otellini oversaw a reorganization that helped to boost Intel's financial results, the company was late to jump into mobile chips and now faces a tough time catching up to competitors. San Diego-based Qualcomm recently surpassed Intel's market capitalization as its mobile chips score big in smartphones and tablets, and Intel's early steps into the market -- years later than some competitors -- have gained it less than 1 percent of the market so far.

With Otellini stepping down much earlier than expected and Intel facing a change to mobile that few in the company have accomplished so far, the company could turn to an external candidate for the first time. Otellini was just the fifth CEO in Intel's history, a list that includes both co-founders of the company, and spent 33 years moving up the ranks before his seven-year reign as CEO.

Intel did promote three internal candidates to the executive vice president level in Monday's news release: Renee James, the head of Intel's software business; Brian Krzanich, Intel's chief operating officer; and Chief Financial Officer Stacy Smith. While Williams Financial analyst Cody Acree told Reuters that Wall Street may be most comfortable with the CFO taking over -- "There a comfort level with Stacy (Smith). I think we'd get more continuity with the current road map and direction than you would with anybody else" -- other analysts couldn't see Intel choosing a financial wizard to lead a tech company, and said an outside hire was likely. 

"If the board really wants a change, they've got to go and get a turnaround guy," RBC Capital Markets analyst Doug Freedman told Bloomberg News. "That's difficult for a company the size of Intel. You'd need someone from a big company."

Intel spokesman Chuck Mulloy confirmed that the company would consider external candidates, telling Bloomberg, "We have excellent internal candidates but will also look outside."

Outside executives mentioned as possible candidates Monday included Pat Gelsinger, who left Intel three years ago to join EMC and was recently appointed CEO of Palo Alto-based VMware. "I think Pat left because he thought (Otellini) would stay forever," Roger Kay of Endpoint Technologies Associates told MarketWatch.

Former Motorola Mobility CEO Sanhay Jha, who was forced out after Google's (GOOG) acquisition of the company, and Hewlett-Packard (HPQ) executive Dave Donatelli were also mentioned as external candidates by AllThingsD reporter Arik Hesseldahl.

Intel's traditions do matter, however, and it has six months to consider internal candidates besides Monday's promotion list, including David Perlmutter, the company's chief product officer whom analyst Kay said is "strong in mobile." Tom Kilroy, general manager of Intel's sales and marketing group, and former CIO Diane Bryant were also mentioned as possible internal successors.

Intel will likely take months to decide on its next CEO, which could make Wall Street nervous. The company's stock has already been trading at 52-week lows for the past two weeks as investors' skittishness about the personal-computer industry have grown and Apple reportedly has considered dropping Intel chips. The company's shares hit a new 52-week low of $19.73 after the news was announced Monday morning, but managed to rebound to a slight gain of 0.3 percent on the day, closing at $20.25.

Apple's downturn turns around as Wall Street soars higher

Intel's gain on Monday pales in comparison to Apple and the rest of Wall Street. After struggling for two weeks following the election on fears of a stalemate in politicians' talks on the "fiscal cliff," all three major U.S. stock indexes gained more than 1.6 percent Monday, led by the tech-heavy Nasdaq's gain of 2.2 percent.

Apple was the biggest reason that the Nasdaq and Standard & Poor's 500 had a bigger percentage increase than the Dow, as the Cupertino company bounced back from a two-month string of weakness with its second-highest one-day gain of all-time. The tech giant's beleaguered stock price rose $38.05, or 7.2 percent, to close at $565.73, pulling its market-leading valuation back above the $500 billion mark it fell below last week.

Apple stock has suffered since the Sept. 21 launch of the iPhone 5, with an executive shakeup, production problems and declining tablet market share contributing to a sell-off of Apple shares that sent the stock into "bear market" territory, defined as a drop of 20 percent or more in a two-month span. Even with Monday's huge bounce, Apple is still 19.8 percent lower than the high it hit on the iPhone 5 launch day.

Other Silicon Valley stocks enjoyed a bountiful day as well Monday, with the SV150 index of the region's largest tech companies surging 3.5 percent higher. Sunnyvale Internet company Yahoo (YHOO) gained 2.8 percent to hit its highest price in 18 months as investors cheered CEO Marissa Mayer's leadership. Hewlett-Packard, which has been trading at decade-lows at times in the past month, increased 3.5 percent one day before it announces quarterly earnings. Yelp soared 8.6 percent higher Monday and LinkedIn rose 2.3 percent, but other social-networking companies were not as fortunate: Zynga dropped 0.9 percent and Facebook fell 2.7 percent after its spectacular gains last week, as the Menlo Park company revealed information about how it determines what information reaches a user's feed.

Cisco to pay $1.2 billion for S.F. wireless company that rivals Ruckus

Cisco gained 1.7 percent Monday, a day after it announced plans to acquire San Francisco wireless startup Meraki for $1.2 billion. Meraki's offerings are optimized for cloud computing and will form the center of Cisco's cloud offerings, along with last week's cheaper acquisition, Santa Clara-based Cloupia.

Meraki focuses on network solutions for mid-sized businesses that utilize cheaper cloud computing and wireless networks. While the company could easily incorporate such systems into its deals with larger companies, they faced more focused competitors that were making headway with smaller businesses.

"Cisco didn't really have anything to counter that before," ZK research analyst Zeus Kerravala told Reuters.

Competitors who had taken advantage of that hole in Cisco's offerings could face pressure with the large acquisition, most notable Aruba Networks and Ruckus Wireless, the Sunnyvale company that had its debut Friday on Wall Street. Rumors of Cisco's move for Meraki, which the company said had been in the works for months, may have attributed to Ruckus's 18.3 percent drop in its first day of trading; on Monday, it gained some of those losses back with a 2.5 percent gain, but still closed 16.3 percent lower than the IPO price at $12.55.

Silicon Valley tech stocks

Up: Yelp, Apple, Palo Alto Networks, Electronic Arts (ERTS), Jive, HP, Tesla, Google, Advanced Micro Devices, Applied Materials, Yahoo, Nvidia, LinkedIn, NetApp, Cisco, Workday, eBay (EBAY), Symantec

Down: Facebook, Splunk, Zynga, Intuit (INTU), SunPower

The tech-heavy Nasdaq composite index: Up 62.94, or 2.21 percent, to 2,916.07

The blue chip Dow Jones industrial average: Up 207.65, or 1.65 percent, to 12,795.96

And the widely watched Standard & Poor's 500 index: Up 27.01, or 1.99 percent, to 1,386.89

Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.