Intel Corp said on Thursday its board had elected Chief Operating Officer Brian Krzanich as the chipmaker's next chief executive, disappointing investors who were looking for more aggressive change.
Intel shares fell 1.3 percent in early trade but later traded flat. The world's biggest chipmaker had said last November that it might go external for the next CEO, raising hopes that it might find someone to shake it out of recent doldrums.
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"An external candidate might have been a better choice - with no negative reflection on Brian - simply because of the juncture Intel is at with what's happening in the PC market and the need to take major action outside of PCs," said Cody Acree, an analyst at Williams Financial Group.
"Brian may very well come in and make those same very difficult dramatic choices, but it's less likely."
Krzanich, 52, who has worked at Intel since 1982, will take on the top job at the company's annual shareholder meeting on May 16, replacing Paul Otellini.
The board also elected Ren��e James, 48, to be president of Intel and is expected to expand to 10 members to add Krzanich.
Intel announced in November that it was looking for a new CEO as Otellini announced plans to retire.
The company came under fire during Otellini's tenure for missing out on the mobile revolution, insisting that emerging markets would prop up growth while underestimating the scale of the eventual drop-off in personal computer demand, and orchestrating a push on "Ultrabook" laptops that have so far failed to excite consumers.
Against that backdrop, Intel surprised investors by suggesting it could break with tradition and look outside its ranks for a new chief. But analysts said they were not necessarily shocked that the board settled on Krzanich.
"I'm not hugely surprised. He was probably in most investors' minds a frontrunner," said Stacy Ragson, an analyst at Bernstein Research.
"The strategy that they are on embarking on, the way they are trying to go really involves leveraging their manufacturing technology assets and he's the guy."
Last month, Intel warned that current-quarter revenue would fall as much as 8 percent, given the drop in PC sales. The company affirmed its full-year revenue growth target, but analysts think that forecast will be increasingly hard to hit.
CHEMIST TO CEO
Intel set Krzanich's 2013 compensation package at $10 million including base pay of $1 million, an annual incentive cash target of $2.5 million and equity awards for 2013 with a grant date fair value of $6.5 million.
A chemical engineer by training who went to school in Northern California, he started with Intel in New Mexico as a process engineer before moving on to a series of factory management positions.
He holds one patent for semiconductor processing and sits on the board of an industry association.
Intel shares were down 2 cents at $23.97 on Thursday morning on the Nasdaq, off an earlier low at $23.67.
(Reporting by Sinead Carew and Liana B. Baker in New York and Noel Randewich in San Francisco; writing by Ben Berkowitz; editing by Alden Bentley and Matthew Lewis)