Disposing of 'Intel Inside'

[tw]

Intel may be in serious trouble. It’s just not obvious on the spread sheets and will not be apparent for four and more years later when work performed this year starts appearing on those spread sheets. Symptoms start when you look at its top manager. Paul S. Otellini is the first non-engineer to run the company. Otellini studied economics in U of San Francisco and then an MBA from University of California at Berkeley. Many new employees include software developers, sociologists, ethnographers, even doctors to help develop products. He lays particular emphasis on marketing expertise because he thinks the only way Intel can succeed in new markets is by communicating more clearly what the technology can do for customers. This is the same mentality that Lucent used to even undermine the Bell Labs. Obvious application only undermined and destroyed the genius in Bell Labs. Otellini is talking the same way having no experience where the work gets done.

Instead of remaining focused on PCs and other processor related functions, Otellini is changing Intel to play a key technological role in a half-dozen fields, including consumer electronics, wireless communications, and health care. And rather than just microprocessors, he wants Intel to create all kinds of chips, as well as software, and then meld them together into what he calls "platforms."

Intel got where it is by doing what it did productively AND nurturing others to do same or compatible functions into a system. For example, computer chip sets, modems, video cards, etc are all contributors to making Intel innovative and productive. Intel defined a strategic objective, then designed and controlled the heart of a system design that all others contribute to. Some of those successes are USB, AGP video, PCI bus, power supply standards, video standards, Ethernet, wireless computing, most of the mobile computer functions, and the so many ways of powering and powering down a system.

So Otellini will take all this work from others to make Intel a better company? Somehow compete against its own partners?

Some of Intel's problems were already created by Barrett - the previous boss who followed a legendary Andy Grove. But symptoms of a company in even deeper trouble are demonstrated by how Otellini will solve these problems. They intend to blow up Intel's branding; a fifth-best-known brand worldwide. Intel will "clear out the cobwebs" and kill off many Grove-era creations. Intel Inside? The Pentium brand? The widely recognized dropped "e" in Intel's corporate logo? All will be eliminated - as if redesigning fenders on a GM car will fix the problems inside. But remember, Otellini is an MBA and does not come from where the work gets done. His solutions will only be what he can see - not where problems really exist. Somehow rebranding Intel will solve everything?

Intel's problems started with Pentium 4 when the architecture got so large that a chip could not be produced reasonably. The solution was to optimize compilers so that Pentium 4 would remain faster. Intel's genius was in processing and manufacturing that others could not do equal or better. Smaller transistors, less heat, faster switching times, introduction of the most advanced new process technologies and materials. This combined with partners who were some of this nation's best corporations - Microsoft, Dell, Compaq, HP, the so many video and BIOS manufacturers, modem designers, chipset designers, memory manufacturers, and networking companies. All partnered with or had their designs defined by Intel.

Well Intel started to hit a brick wall. Its advanced manufacturing abilities were confronting limits of transistors. Its architects had not kept up their microarchitecture. And its management under Craig Barrett apparently were too busy looking at spread sheets to, instead, see a technology barrier approaching.

Suddenly last year, Intel canceled all new chip designs because heat and other problems made the Pentium too difficult. Suddenly the new Intel architecture was created due to an ignored problem - and created in an emergency solution - a dual core chip design. This being ironic because Dr Craig Barrett's background is material science with over 40 papers in the science. He should have seen it coming.

Well Intel recently hyped a whole new microarchitecture to fix the weakest part of a Pentium design. Will it solve Intel's recent loss of one title - 'fastest server processor' - to AMD?

So Intel must address its product line - technically. Instead Otellini wants to diversity the company into doing what its so many product partners accomplish. Somehow he thinks the GM corporate strategy will save Intel. Somehow putting Intel in direct competition with Texas Instruments and other so innovative companies will make Intel better? The guy must be an MBA in the tradition of Carly Fiorina - who received a same early analysis from this author for same reasons. She too hyped the word innovation while doing the classic bean counter shuffle.

This is not good for Intel, Intel consumers, or America. It reminds me of how AT&T decided all other computer manufacturers were incompetent and that AT&T would become the new power in computing. AT&T was also destroyed by MBA management with the same new philosophies. Their soulution - buy and destroy NCR.

AMD - a German processor manufacturer - is quietly eating away at most of Intel's product line. Intel's only promising processor markets are in its Pentium M series - mobile computing. Even its non-volatile memory business may be in trouble without a breakthrough new technology product.