By Nina Trentmann 

Intel Corp.'s move to hire an outsider as finance chief is the latest step in the transformation of a company that historically relied on promoting homegrown talent and comes as the chip maker shifts its focus to data.

The Santa Clara, Calif.-based company on Tuesday named George Davis chief financial officer, effective Wednesday. Mr. Davis joins Intel from Qualcomm Inc., where he served as finance chief for the past six years. Intel's CFO post had been vacant since Jan. 31, when former finance chief Bob Swan became chief executive.

Intel has increasingly turned to outside candidates when filling top vacancies in recent years, a break from its longstanding preference for internal talent. Last year, the company hired Jim Keller, who had overseen Tesla Inc.'s autopilot program, to become senior vice president in the technology, systems architecture and client group. In 2017, Intel recruited Raja Koduri for the chief architect role from Advanced Micro Devices Inc.

And Mr. Swan himself joined the company in 2016 as the first outsider finance chief since 1983, having previously served as CFO at several companies, including a nine-year stint at eBay Inc. Intel's chief engineering officer Venkata Renduchintala -- like the new CFO -- came from Qualcomm.

"It is no longer the old Intel anymore that we are used to," said Ambrish Srivastava, an analyst at BMO Capital Markets. "The company has shown a lot of willingness to look at talent from the outside," he said.

Intel is betting that external executives will bring new ideas and fresh ways of thinking to help propel the company's transformation, analysts said. The company's focus is moving beyond its former breadwinner, processors for personal computers, to making chips that can tackle how consumers and businesses produce and use data across new and growing areas, including cloud computing and the Internet of Things.

This requires a step change in the way Intel's employees perceive the company and its mission. Whereas Intel has for years dominated the personal computer and data center market, it is one of several players, and often the underdog, in the new markets the company is targeting.

Intel's pivot comes as demand for PCs is falling. Global shipments declined 4% during the fourth quarter year over year, according to research provider Gartner Inc.

And Intel's 10-nanometer technology for more powerful computer chips faces significant development challenges.

By contrast, Intel's focus on data is helping drive growth. The biggest segment of Intel's data-centric businesses, the Data Center Group, saw revenue climb 21% last year to $23 billion, according to the company's latest earnings release.

Still, PC chips and other computing products generated more than half of Intel's operating profit and revenue in its latest financial year, its financial records show.

Intel's new CFO, Mr. Davis, is expected to follow the path laid out by CEO Mr. Swan, including a strong focus on free cash flow, capital discipline and operating expenses, analysts said.

That sentiment was echoed by Mr. Swan. "Our owners can expect a continued disciplined approach to capital allocation and a relentless focus on creating stockholder value," he said in a statement announcing Mr. Davis's appointment on Tuesday.

A spokeswoman for Intel declined to comment beyond Mr. Swan's statement.

Mr. Swan cut the company's operating expenses and freed up capital that went into new products, said Kevin Cassidy, an analyst at Stifel Financial Corp. As Mr. Davis takes over, he could further slash its marketing spending, which in the past promoted the company's chips alongside various personal computers, Mr. Cassidy said.

"You rarely see makers of semiconductors advertise to end-customers," Mr. Cassidy said, adding that the company recently reduced this type of spending.

Mr. Davis's tenure at Qualcomm, which focuses on processor chips for mobile devices, a market where Intel is a fringe participant, was marked by significant challenges. These include the company's ongoing patent fight with Apple Inc. over royalty payments, an unsuccessful attempt to acquire NXP Semiconductors NV and a f ailed takeover attempt by Broadcom Inc.

Qualcomm stock is down 13% compared with where shares traded when Mr. Davis became CFO in March 2013. Over that period, Qualcomm also has underperformed the S&P 500 by 98% and lagged Intel by 165%, according to Stacy Rasgon, a managing director at AB Bernstein. "Most Qualcomm investors have been very frustrated with the management," Mr. Rasgon said.

Qualcomm on Tuesday named David Wise, its senior vice president and treasurer as interim CFO while the company searches for a permanent replacement for Mr. Davis.

A Qualcomm spokeswoman declined to comment beyond the company's Tuesday press release.

With the advance of 5G internet, Intel and Qualcomm could become direct competitors, as both companies push to develop products for this type of superfast broadband. Both companies are also targeting demand for processing units from carmakers, another avenue of potential growth, and have, in some instances, moved into each other's turf.

"The overlap between the two is relatively small and the market is big enough for both to grow," said Timothy Arcuri, a managing director at UBS Investment Research.

Write to Nina Trentmann at Nina.Trentmann@wsj.com

 

(END) Dow Jones Newswires

April 03, 2019 18:00 ET (22:00 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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