Inside Intel

To bolster the push, Otellini is looking to recruit more execs from outside the company. In the past year, Maloney hired Nokia Corp. veteran Steven Gray as a key member of the cellular team. And Maloney is turning more often to Intel Vice-President Sam Arditi, a cellular industry veteran with experience in radio chips and processors — key ingredients in handsets.

The result: closer ties with Nokia and Samsung, which are both collaborating with Intel on WiMax. In September, Maloney also announced a deal with Research In Motion Ltd., making it the first major name to use its cellular platform of radio, processors, and memory. "The relationship is going to be very important to RIM," says co-CEO Jim Basillie.

For all that, Otellini's internal challenges may prove more daunting than the external ones. For one, PC chip development still casts a long shadow at the company. During Grove's and Barrett's tenures, anyone not producing for the core PC business was considered a second-class citizen. Barrett described the problem as akin to the creosote bush, a tall desert plant that drips poisonous oil, killing off all vegetation that tries to grow nearby. Microprocessors so dominated the company's strategy, he says, that other businesses could not sprout around it. That was one reason Otellini reorganized into product areas.

The shake-up hasn't helped company morale, though. Especially hard-hit were the engineering teams in California and Texas, which had been working on the Pentium 4 until Otellini canceled it. Some of the design specialists have quit for new jobs, often with AMD or TI. To smooth over the troubles, Otellini has toured the chipmaker's outposts, talking with engineers and others without their managers around. "A lot of what he heard was pent-up frustration, no doubt," says one engineer. "But you appreciate the fact that he's listening." Intel's attrition in 2005 was 4%, about average for the tech industry.

Sniping about the rise of marketers such as Kim continues. Says Schmuel "Mooly" Eden, an Israeli engineer who helped spearhead the Centrino launch and now heads marketing for the Mobility Group: "When I went back to Israel to talk to some of the engineers, they said: 'You're only one year in marketing, and already you're brain-damaged."'

As Intel gears up for its big bang of product launches, there's no doubt the mantle of leadership has shifted. This year, Otellini, for the first time, will write a performance review for Grove. In his advisory role, Grove sits in on important meetings, particularly in digital health, and gives his thoughts. Asked about the prospects of critiquing the company legend, Otellini just laughs. Reviewing Grove will be a breeze next to the challenge of remaking the world's largest chipmaker.

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