There are two kinds of CEOs: Those who love the spotlight and those who hate it. Paul Otellini, chief executive officer of Intel, falls into the latter category. But in January, as he stood in front of several thousand people at the Consumer Electronics Show in Las Vegas, Otellini didn't seem to mind the attention. In a Steve Jobs-like moment, he pulled a shiny four-inch smartphone out of his pocket and held it up for the audience to see. The device had plenty of bells and whistles, including front- and back-facing cameras and an HDMI output for high-resolution video.
Most striking of all was what the audience couldn't see: the tiny Intel microprocessor -- called Medfield -- inside. The phone wasn't for sale (it was a prototype Intel had put together), but the crowd cheered anyway. After years of delays and missteps, Intel, it seemed, finally had a viable product to show for its efforts in mobile phones.
"Would I have liked to be earlier? Yes," Otellini told Fortune in an interview at the company's Silicon Valley headquarters the week after his Las Vegas keynote. "Do I think this is a problem entering today? No, I think we're in the beginning of this thing. We have the opportunity to redefine what computing means in your pocket, and I don't see any other player in the industry with that potential."
Intel (INTC), with $54 billion in annual revenue, is the biggest chipmaker in the world. It employs 100,000 workers, including some of the brightest minds in the semiconductor industry. But when it comes to powering mobile phones, Intel is nowhere. Not a single commercially available mobile phone uses an Intel processor, and that's no small problem, since much of the world is increasingly using mobile phones -- and tablets -- to do tasks once performed on desktops and laptops.
Intel's prowess in building brawny, high-powered chips has been its biggest obstacle to cracking the mobile world, which requires low-power processors. A year and a half ago Otellini decided that Intel needed managers and engineers with hard-core mobile experience. He hired Mike Bell, an executive from Palm and Apple (AAPL) who had contributed to the development of the iPhone. Bell, who now co-leads Intel's newly formed mobile and communications group, was charged with building a prototype, or reference design, that would show manufacturers what Intel could do in mobile. The device, which used the Medfield chip, became known internally as FFRD, short for form factor reference design (sexy code names are not Intel's forte), and it paved the way for manufacturers like Lenovo and Motorola (MMI) to commit to launching Intel-powered devices sometime this year.
But Otellini knew he needed to do more than make a few key hires. In August 2010, Intel bought the wireless-solutions business from German chipmaker Infineon for $1.4 billion, giving Intel a foothold in baseband processors (a component that manages the 3G radio functions in a smartphone) and about 4,000 employees who know mobile devices.
