As COO, Otellini will be responsible for Intel's operations, including new product development, while Barrett, as CEO, will continue to oversee corporate strategy and long-range planning.

The move is the board of directors' signal that Otellini, 51, a 27-year veteran of Intel, will succeed Barrett, 62, thereby becoming the first person with a non-technical background to take the helm of the world's largest chip producer. His predecessors over the past three decades — Robert Noyce, Gordon Moore, Andrew Grove, and Barrett — were all trained in physics, chemistry, and in Barrett's case, materials sciences.

Otellini holds degrees in economics and business.

Intel has a mandatory retirement policy for employees aged 65, and the move to put Otellini and Barrett together in what Intel managers describe as a "two-in-the-box" management style gives Otellini a few years to prepare for the top job.

Nathan Brookwood, a longtime Intel-watcher and principal analyst at Insight64 (Saratoga, Calif.), said Otellini "is clearly the most qualified person" to succeed Barrett. Brookwood described both Otellini and Barrett as "well-grounded" men, slow to anger and able to communicate the company's vision to employees and outsiders alike.

Otellini's promotion comes at a time when Intel faces more challenges than in the 1990s, when Intel had little competition in its core microprocessor business, Brookwood noted.

"To Jerry's credit, AMD is a far more capable competitor now than it was in early 1999," said Brookwood, referring to W.J. Sanders III of Advanced Micro Devices Inc., the only CEO the 33-year-old AMD has ever had. Sanders named former Motorola Inc. executive Hector Ruiz as his successor in 1999.

As Intel announced Otellini's promotion, AMD on Wednesday reported that net sales for the quarter ended Dec. 30, 2001, grew by 24 percent over the previous quarter to $951.8 million. However, unlike Intel, which remains profitable, AMD suffered a net loss of $15.8 million for the quarter.

Jonathan Joseph, a San Francisco-based securities analyst at Salomon Smith Barney, credited Otellini in part with spurring a revival in personal computer sales in the fourth quarter.

"Otellini was partly responsible for a very bold move back in July, when he decided to push for sharp price cuts in microprocessors. That was a gutsy move that helped galvanize the microprocessor and personal computer markets, which helped AMD as well as Intel. So my hat is off to Otellini, it's a well-deserved promotion," Joseph said.

Looking forward, Brookwood said Intel's successful Pentium 4 processor line and the fast transition to a 0.13-micron process put Intel in a good position for growth, though the PC market has clearly lost its luster.

Moreover, "Intel today, due to Barrett's leadership, is a considerably more diversified company than when he took over. The Xscale processor is in a good position. The communications acquisitions didn't all work out, but eventually, if they keep at it, Intel will be a much more diversified company," Brookwood said.

Since 1998 Otellini has been the executive vice president and general manager of the Intel Architecture Group, where he was responsible for the company's microprocessor and chip set businesses. He served as executive vice president of sales and marketing from 1992 to 1998. He was assistant to then-Intel president Andrew S. Grove in 1989, and became general manager of the microprocessor products group in 1990, leading the introduction of the Pentium microprocessor in 1993.