The Resurrection of Wintel Part 1.

Posted on May 19, 2013 by avram miller

I never imagined I would be writing this post. I was planing on writing what I thought would be my last post about Intel. It was to deal with the departure of Paul Otellini the former CEO and a recent article about him published by the Atlantic. I will do an abbreviated comment on that and then begin to get into the meat of the Wintel Resurrection.

Paul Otellini Regrets

The Atlantic Monthly had a major article on the retirement of Paul Otellini the former CEO of Intel. Frankly, I think the article was very kind to Paul. Paul probably did a very good job of being the caretaker of the strategy that his predecessors Barrett and Grove had established. We called that, The PC is iT strategy. But the world changed from the 90s when we realized the power of the PC and Intel did not change. While Intel’s business grew significantly, it stock price pretty much stayed flat during Paul’s eight years as CEO. Wall street evidently felt that Intel was not in a position to take advantage of the growth of the Internet and especially of new devices such as the iPhone and they have been largely correct in that assessment. Paul showed no leadership in this area which is a bit strange since he served on the board of Google since 2004. He of course profited from the options he received as a board member. Too bad he did not influence Google to consider quality control as an important attribute of a successful company.

I should probably say that for many years, I considered Paul a friend. We first met up when he was the Technical Assistant to Andy Grove. This was a very important position in terms of advancement in the company because it provided the opportunity to learn how the CEO actually operated. But most of the work really had to do with creating presentations. Paul would refer to himself as “Andy’s foil slave” (this was before powerpoint and we used overhead projectors). Paul and I would often have lunch together. My personal experience with Paul until I left Intel was very good. He is really a nice person, fair and dedicated. But was not a risk taker at a time when risks were needed. I still like him and feel bit bad about making a few negative comments about Pau over the years. I hope now that he has left Intel he will use his skills and significant wealth to make the world a better place.

So in the article, Paul laments about not getting the design win for the iPhone. According to the article Intel lost the order because of price. Frankly, while price may have something to do with it, power requirements may have also played a role. Paul says that his gut told him that Intel should do what ever it took to get the design win but the data argued the opposite. Intel believed that the market for smart phones was about 1/1,000th of its current size. Had they gotten the “Design Win”, they would have been able to ramp up their manufacturing capability to the point that they could have made money on the chips but maybe not “PC money” which continues to be Intel’s problem in pursuing new markets.

I know first hand what Paul is saying. In my early years at Intel, I would get beaten down with “data”. I learned never to say “my gut tells me we should do this” even though it was my intuition that drove me. After a while, I would make up data and/or get reports at major newspapers to say what I could not say at Intel and then I could reference their reports. Paul’s background was in Finance and Sales. My background was more in technology, marketing and science. During Paul’s tenure, the few intuitive people left or were driven out. Now they have a CEO who came from manufacturing. Paul was worked for Intel for 40 years. The new CEO Brian Krzanich joined Intel in 1982 and worked in manufacturing until he became COO in 2012. His first job at Intel was in Process Control. In that position he was responsible for making sure nothing changed. How about that for a visionary CEO? This last remark may not be fair since I never meet Kranich even though he was at the company the whole time I worked there.

I spoke about the importance of intuition to FastCompany Magazine in 1999. Here is some of the things I said that might have changed Intel had Paul read and acted on the article.

“Today, when Intel builds a new factory, it’s investing $2 billion in products it hasn’t yet designed for markets that don’t yet exist. This is hard for American businessmen, and I say “men” because in order to do this, you have to give up control — and giving up control makes guys really miserable. Control is an illusion. I don’t think that it ever existed, but now even the illusion is gone. As a result, we’re experiencing the rebirth of intuition.

In our society, we often don’t want to admit that we know something if we don’t know why we know it. At Intel, I used to have a horrible problem. I’d go into a meeting, and I’d be very convinced about something, and people would say, “What evidence do you have for it?” And I’d say, “I don’t have any evidence.” They’d expect me to be analytical about it, and I wouldn’t be. Over the years, I learned to make up some bullshit story to convince them, but it had nothing to do with why I thought it would work. I just knew.

In Hollywood, you’re expected to be intuitive. In the entertainment industry, you have people who have intuition and people who imitate. Nobody there analyzes. But for the most part, in our society, if you know and you don’t know why you know, then obviously whatever you know doesn’t matter — which is stupid. If you have been right about things for 20 years, then you should be able to say, “I don’t know why I know, but I know.” If I’m hiring people, I don’t want to know how they know, I just want to know that they have a good record of being right.

So I had pretty much written off Intel until yesterday. Yesterday, I went for a walk with a former colleague at Intel who is both a mentor and friend to me. We spoke of Intel, Apple, Google and Microsoft. Out that conversation came the rest of this blog post.

The resurrection of Wintel

The death of Wintel

For over ten years, Intel and Microsoft have been drifting. While their revenues increase, their stock prices stayed flat. It seemed that both companies had missed the next generation of the internet. With the exception of the Xbox, both companies revenues came from the PC industry. The Informal” alliance that Microsoft and Intel had which the Industry called by the somewhat derisive term, “Wintel” was no more. It had become irreverent and especially after Intel embraced Apple and went from being Microsoft bitch to being Apple’s bitch. But both companies are still incredibly strong. Both have significant cash, Microsoft way more than Intel, and technical resources. What they have been missing is a strategy.

For Wintel to resurrect, the world of computing has to change once again and in ways that create disadvantages for companies such as Apple and Google and advantages for Intel and Microsoft. I will explore that next.

I should also say that I am not impressed with Larry/ Sergy or Mark (does using their first name make me hip?). Google may be more mediocre than Microsoft ever was. Facebook is the DOS of social networks. But these are the guys who got started on the new cycle while the old guys tried to keep the old cycle going (always a losing strategy). Jeff Bezos is the only one that has made the transition. I think he is brilliant, but thankfully I never had to work with him.

Multiple Devices meet Multiple Clouds

We are going through a major transition in personal computing (I did not say personal computers). Many of us have multiple devices- a smart phone, a tablet, desktops or notebooks, game machines, and DVRs etc. We are also begining to see what is called the internet of things which really means special purpose devices like lights, appliances, autos, etc that communicate with us and other systems via the internet This has necessitated the movement to the cloud which in a way creates a hierarchical architecture. It is just too hard for each device to communicate directly with each device so rather, we have devices communicating with the cloud and an synchronizing with data that way. But there is not just one cloud there is a storm. Apple has one, Google has one, Microsoft has one just to name a few.

Capabilities are increasing dramatically but so is complexity. Application development is also increasing in complexity to deal with multiple eco systems. The power of “The PC is It” was that there was a homogenious environment for developers and users. It also had it inherent problems. Microsoft tried to develop an operating system that could scale from the smallest device to the largest computer. It was a very difficult task and they failed at it a number of times. The only thing that is harder is to try to support multiple operating systems. Apple is struggling with that with OSX and iOS.

This model of computing has a very limited life span. In my next blog, I will discuss what I think might be the next generation of computing and why it is even possible that it will be lead by Wintel.

To be Continued

To my subscribers

Posted on May 3, 2013 by avram miller

I started this blog almost eight years ago when I turned sixty years old. My average number of visits per day has gone from ten to fourty during that time. The total number of views is now over 45,000. This does not count those that subscribe to this blog. Since the way I set up the email subscriptions provides the complete post, there is no need for a subscriber to go to my site. But this also means, I do not actually know if the blog post was read. I am about to change that. Now you will only get a summary and will have to go to my blog to read the full post.

It took my seven years to get about a hundred subscribers. In the last month or so, I have more than doubled the number of subscribers and have no idea why. Many of you do not seem to be the kind of reader I would expect. I would love to hear from you as to why you subscribed. I think that something either changed with WordPress or perhaps it was my Wikipedia entry that is driving new people to my site where they subscribe. Frankly, it feels kind of strange.

Time to Channel Steve

Posted on April 24, 2013 by avram miller

As a reader of this blog, you probably know that Apple stock has lost almost 40% of it value from a high of $705 to low of $409, as of this morning. In just seven short months Apple has gone from the “wonder company” which might have become the first company with a trillion dollar market cap to a “dog”. Tim Cook went from sucessor of Steve Jobs to an Apple version of Steve Balmer. At the earning announcement yesterday, Apple reported a down earnings quarter year over year for the first time in a decade. iPhone sales are now having single digit growth. Apple is entering the replacement phase of their business. What was worse, there was no indication of new products to the fall and nothing about a new breakout category. Rather, Apple said it would buy back its stock and double its dividend and thereby demonstrated that do not have better ideas for their cash like acquiring Dropbox and/or Netflix.

What went wrong. Apple had been growing by creating new categories of computing from the iPod, iPhone and iPad. They were brilliant at design and marketing of these products. The combination of their increased buying power coupled with the benifit of Moore’s law allowed them to make significant improvements in these products but all good things come to an end. For instance, how many pixels do you need on a phone? The answer is clearly no more than you can see. In the meantime, the double edge sword of Moores law, means that it is easier for competitors to catch up from a lower price point. As products come to market from companies like Samsung that have similar capabilities but at much lower price points, new years especially in price point sensitive geographies start buying these products. Apple can not easily reduce price without having a major effect on their margins. They want to keep the margins up feel that they can hold onto most of their customers because of the high cost of switching out. Cook thought he could grow the company by explaining in new markets but that is turning out to be harder than he probably thought.

Apple’s strength has been in integration of devices but many young people only have one device. And more and more, applications are moving to the cloud. I use to tell Andy Grove that Intel’s competition was not AMD but it was bigger screen monitors. He never got that by the way. Right now there are many companies chipping away at Apple in areas that Apple does not really pay attention to. For instance Dropbox. Apple is bit particularly talented in network technologies. The real sleep here is probably Amazon. The cloud will have impact on iTunes. Why own music when you can subscribe to Spotify.

Steve Jobs was not only the composer of Apple’s success but he was also the conductor who had an excellent sense of time. Steve would tell everyone inside and outside of Apple that Apple would not do certain things (“we will never develop a phone”) only to reverse himself later either because he changed his mind or he just was trying to manage company priorities. After Steve died, the company continued to work on the things Steve said to do but no one was able to work on the things Steve said not to do. That is why it may be necessary for Apple to Channel Steve to get permission to go against some positions he took.

It was reported that Jobs figured out what to do with the TV causing lots speculation about a true Apple TV. I have always had might doubts about this. It just did not make sense. I have spent months trying to figure out what if anything Apple could do to do to TV what it did to the cellular phone. Well I finally figured it out but I realize that Apple is no longer capable of making it happen.

If there heaven and Steve Jobs is there, I can imagine that he is looking down on Apple and trying to figure out how to change the channel.

Rejected by Wikipedia

Posted on April 10, 2013 by avram miller

If you are a regular reader of this blog you will realized that at the age of 68, I am beginning to be concerned about legacy issues. It was been concerning to me that I have no Wikipedia entry about me because Wikipedia will have a long self live (certainly longer than I will have). So I asked a friend who is also a write to submit an entry for me on Wikipedia. We worked on a draft which he actually toned down. My first draft was actually in my opinion the most interesting because it was written more like a story then an encyclopedia. I wanted the entry to focus on what I think are my three major achievements, playing a principle role in laying the foundation for today’s consumer internet, founding Intel Capital which became the most successful Corp. Venture group and one of the must successful venture activities in the world and having accomplished this an more without ever having gone to University.

The first submission was rejected. See above. My friend took out all the “peacock terms? The second pass was accepted. I liked my draft more so I thought I would share it with you my friends, family and readers.

Avram Miller (born 27 January 1945) is an American businessperson, venture capitalist, scientist and technologist. He is best known for his work at Intel Corporation (1984-1999), where he served as Vice President, Business Development. Together with Leslie Vadász, he co-founded Intel Capital. Miller led Intel’s successful initiative to create residential broadband Internet access.

Miller’s leadership in developing both the technology and business infrastructure for residential broadband laid one of the most important foundations for the construction of the modern Internet. In a 1996 profile, USA Todaycalled Miller “A one-man think tank.” In the same article, Brian Roberts, CEO of Comcast, gave Miller “much of the credit” for the development of the cable modem. While at Intel, Miller managed a multi-billion dollar portfolio that included early investments in many seminal Internet technology companies, including Broadcast.com, CNET, Covad and Verisign.

After leaving Intel in 1999, he founded The Avram Miller Company, which focuses on providing strategic advice to technology companies throughout the world. Miller has served as a senior advisor to Lazard, and has sat on the boards of many public and private Internet companies, including CMGI, World Online and PCCW.

Over the years, Miller has also served on the boards of entertainment companies such as Maxis and King World Productions. Recognized as a leader in venture capital, Miller occupied the number eight position in the 2003 Forbes Midas List of top venture investors.

Miller has long been active in non-profit work. He was the founding chair of Plugged In, a computer literacy program for underserved urban youth (1992-1999), a senior advisor to Equal Access (1999-2012) and a trustee of the California Institute of the Arts (CalArts) 1998-2002.

Early Life and Education

Avram Miller is a fourth-generation San Franciscan born into a middle class Jewish family on 27 January 1945. After graduating from Drew School, a private high school in San Francisco, in 1963, Miller joined the United States Merchant Marine as a steward. He sailed on the luxury liner President Cleveland between San Francisco, Hawaii, Japan, Hong Kong and Manila during much of 1963. Upon his return to San Francisco, Miller got involved in the civil rights movement and the anti-Vietnam war movement. In 1966, he worked in a government-sponsored tutorial program to help economicly disadvantaged youth in East Palo Alto, CA, prepare for university education.

Miller did not attend university and does not have a college degree. Primarily self-educated after high school, Miller began working with computers in 1966, and by the time he turned 30, had held academic appointments at two universities.

Miller began studying music composition at age 15. He continues to pursue his commitment to music, including composing and playing jazz piano.

Career

Langley Porter (1966-1969)

Toward the end of 1966, Miller began work at the Langley Porter Institute, University of California San Francisco Medical School, under the direction of Joseph Kamiya, PhD. Kamiya was a pioneer in the study of biofeedback and the first scientist to demonstrate that human beings could learn to control their brainwaves (EEG) using biofeedback. Miller employed his lifelong interest in electronics in developing much of the equipment that was used in this research. This work gave Miller the opportunity to learn all aspects of electronic design, from microvolt amplifiers to special purpose digital computers.

About a year after Miller joined Kamiya, Langley Porter got its first computer, a PDP-7 from Digital Equipment Corp. Though he lacked any prior computer experience, Miller quickly became an expert programmer. During his time with Kamiya, Miller learned scientific methods, statistics and advanced mathematics. By 1969, at the age of 24, Miller proved expert in all aspects of real-time physiological signal processing.

Thoraxcenter (1969-1974)

In early 1969, Miller was recruited by world-renowned cardiologist Paul Hugenholtz. Hugenholtz had decided to return to his native Netherlands, from Boston, to start a new cardiovascular institute at Erasmus University in Rotterdam, called The Thoraxcenter. While in Boston, Hugenholtz had collaborated with computer scientists at MIT and sought to deeply integrate computing technology in both patient care and research at The Thoraxcenter. Miller was given an appointment to the academic staff at Erasmus University and he began to build the computer department. Early in his time at The Thoraxcenter, Miller transitioned from an individual contributor to a manager.During his five years at The Thoraxcenter, Miller and his team developed one of the world’s first on-line Intensive Care monitoring systems, catheterization laboratory systems, and the first system to manage echocardiograms. Miller also co-authored many academic papers for both medical and computer publications.

Mennen-Greatbatch (1974-1979)

Moving with his family to Israel in 1974, Miller joined medical technology manufacturer Mennen-Greatbatch (now Mennen Medical) as founder and director of their computer division. Responsible for product development, sales, marketing and finance, Miller commercialized some of his work at Thoraxcenter and gained substantial business experience. He also was named Adjunct Associate Professor at Tel Aviv University School of Medicine, working in the department of Cardiology under Professor Henry Neufeld.

Digital Equipment Corporation (1979-1983)

Returning to the United States in 1979, Miller joined the Central Engineering Department of Digital Equipment Corporation, then the world’s second largest computer company. Miller managed the group responsible for hardware development and support of all low-end computers.

A year later, Ken Olsen, Digital’s founder and CEO, tapped Miller to head new group dedicated to developing the company’s entry into the personal computer market. The products developed by the group were known as the Professional Series and were very technologically advanced for the time. The Professional 350, introduced at the 1982 National Computer Conference in Houston, TX, ran a multiprocessing operating system, used a 5 megabyte Winchester drive, ran a fully bitmapped display and had built-in Ethernet capability.Unfortunately for Digital, IBM introduced its first personal computer in August 1981. The combination of IBM’s low price and open standards–which allowed for companies, like Compaq, to build compatible “clones”–totally changed the dynamics of the computer industry. At about the same time, Olsen decided to have Digital bring out two other personal computers, which were neither compatible with the Professional nor each other.

When asked to pick just one to bring to the market, Olsen declined. “Let the customers choose,” he said. ”And they did,” said Miller, discussing this decision in the book The Ultimate Entrepreneur, “they chose IBM.”A documentary, primarily focusing on Miller’s work, was commissioned by Digital to celebrate its twenty-fifth anniversary, but never released. A copy of this film is in the collection of the Computer History Museum in Mountain View, CA.

Franklin Computer (1983-1984)

In 1983, Miller realized the computer world was about to transition from large, vertically integrated companies like Digital to horizontal companies that focused on just one aspect of the business, such as software (Microsoft), disks and drives (Seagate), microprocessors (Intel), systems (Compaq) or sales (ComputerLand). Given this change, Digital was not on track to create a major position in the personal computer market.

Miller was offered the position of Chief Operating Officer at Franklin Computer Corporation (now Franklin Electronic Publishers, Inc.), an early-stage Apple II clone manufacturer. Miller was later named President. Franklin was growing very quickly. Under Miller, Franklin reached $80 million in sales, but the company was locked in a legal battle with Apple that prevented it from getting adequate financing. Miller left Franklin in April 1984.

Intel (1984-1999) and the birth of Intel Capital

A few months after leaving Franklin, Avram Miller was contacted by Intel Corporation. Intel, at that time, was a leading maker of memory chips, but, because of market pressure from Japanese manufacturers, was rapidly shifting its focus to microprocessors. Miller was recruited by Leslie Vadász, a day-one employee at Intel who had lead the company’s efforts to develop its first microprocessor. Miller joined Intel in August 1984, initially working with “The System Group,” a division that developed computer systems

After creating a joint venture between Intel and Siemens Miller, focused on mergers, joint ventures, strategic partnerships and minority investments. Miller’s primary interest in such investments was network technology, which he saw as the prime driver of future personal computer growth. Intel’s strong internal culture limited the benefit of some early acquisitions. By 1988, Miller realized minority investments in early stage companies could provide Intel with strategic insight, ways to grow the overall market and a financial return. Miller put together a small group and began to make such early stage investments. At this point, Miller was given the title Vice President, Business Development, and later was elected Corporate Vice President by the Intel board.

After a number of Miller’s investments proved successful, Andy Grove, Intel’s CEO, okayed a recommendation from Vadász to accelerate venture investment activity. Vadász joined Miller in creating the Corporative Business Developmentgroup (CBD), which later was renamed Intel Capital. As Miller predicted, Intel’s minority investments not only provided strategic benefits, but began to provide substantial financial rewards, as well. Intel Capital grew to become the most successful corporative venture group in the technology sector. It was listed as the top Venture Capitalist in 2012 by Pricor.

While Vadász expanded the group to include investments in enterprise software, semiconductor manufacturing, health and education, Miller focused on the consumer side of the business and, in particular, in the rapid growth of the Internet. Miller’s group was an early investor in companies like Mark Cuban’s Broadcast.com, internet infrastructure and security services giant Verisign, communications semiconductor maker Broadcom, interactive publications innovator Launch Media, the web-hosting service Geocities, the tech media site CNET and broadband network provider Covad (now part of MegaPath Corporation). Miller’s group also invested in CMGI (now ModusLink Global Solutions, Inc.) and PCCW. By the time Miller left in April 1999, the investments he managed were worth many billions of dollars.

Development of Residential Broadband

In 1992, Miller was asked by Andy Grove to be the Intel point person working with Microsoft to develop a number of consumer initiatives. Miller’s counterparts at Microsoft were Rob Glaser (who later founded RealNetworks), and then Craig Mundie (who later became Microsoft’s chief research and strategy officer) as well as Nathan Myhrvold who was the CTO at that time. Intel and Microsoft set up teams to work on a number of projects. Miller was part of the Intel executive team, attending quarterly meetings with Bill Gates, then chief executive at Microsoft, and many of his top managers.

One of the joint projects was the development of an interactive set-top box for the cable television industry. This project also involved General Instrument (GI), then headed by Donald Rumsfeld. General Instrument owned Jerrold, the largest supplier of set-tops at the time. Working with Intel and Microsoft was GI CTO Matt Miller (no relation).

On this project, Avram Miller learned about the cable industry and its infrastructure. By the end of 1992, Miller determined that it would not be possible to build an interactive set-top box at a price point acceptable to the cable industry. Together with Matt Miller, Avram Miller realized much of the technology that was being developed for digital TV could be used to create high-speed residential broadband for Internet connection. GI and Intel then began to develop both cable modems and the head-end equipment used as a gateway to the Internet. General Instrument and Intel kept this project secret from Microsoft.

It was at this point that Avram Miller came to believe consumers would need the same high-speed Internet access that were available for business applications. “It was clear to me,” wrote Miller, “that combining high-speed communications with powerful home computers would lead to the creating of a new medium for information, education, entertainment and commerce.”

In addition to funding the Intel Labs to develop the core architecture to be used in cable internet broadband, Miller met with all the CEOs of the major US cable companies (including John Malone of TCI and Brian Roberts of Comcast) to convince them that cable could be become more than just distributors of television programming. Cable companies, Miller believed, could become communications companies. Miller traveled to Japan, Korea, the United Kingdom, France and Germany with the same message. He organized the first major trials of cable modems with Comcast and Viacom (which then owned a cable business). In 1993, Intel demonstrated working cable modems at The Western Cable Show in Anaheim, CA, one of the cable industry’s major conferences.

Miller also knew that applications would be key. He was able to get such companies as America Online (AOL), Prodigy and Intuit to participate in the broadband trials. Intel then provided the key specification to CableLabs (the research arm of the cable industry), which became the DOCSIS (Data Over Cable Service Interface Specification) standard.

Miller and his CBD team invested extensively in companies that would benefit from the development of high-speed residential broadband, from components to consumer applications. Intel licensed modem manufactures (such as Cisco, Hewlett-Packard and AT&T), and worked with component suppliers like Broadcom (in which Intel also had an investment).

Recognizing that the cable industry did not have the technical capabilities to manage an internet business, Miller conceived of a company that would provide these services, and convinced the venture group Kleiner, Perkins, Caufield & Byers (KPCB, also known as Kleiner Perkins) to work with the cable industry to create the company @Home Network. Intel would also invest in this high-speed cable Internet service provider.

In addition to the development of broadband cable, Miller drove Intel’s activities to create high-speed DSL (digital subscriber line) Internet access, working extensively with telephone companies throughout the world.

Miller has been a consistent promoter of the connected PC as the interactive device for the home, speaking before cable industry conferences, the National Association of Broadcasters and computer industry events. In 1996, Miller worked with Creative Artists Agency (CAA) to established a demo lab to educate Hollywood talent on the potential of the Internet for the entertainment industry. He attended the Allen & Co Sun Valley Conference from 1993-2000. There he had an opportunity to interacted with the leaders of the entertainment industry.

The result of Miller’s work can be seen in the penetration of residential broadband. For instance, over 80 percent of US homes had broadband Internet access in 2012.

The Avram Miller Company

Miller left Intel in April 1999 to start The Avram Miller Company, a strategy and business development group providing services to Internet companies internationally.n addition, Miller served on the boards of many public (CMGI, World Online and PCCW) and private companies (Heavy.com), and was a senior advisor to Lazard Frères & Co (now the Lazard Group LLC). Miller also invested in early stage companies for his own account. In 2003, Miller was ranked number eight on the Forbes Midas List of the top 100 tech investors. Miller, now in partial retirement, continues to work with a small number of early-stage technology companies as well as serving as Chair of the Breakwater Fund.

Personal Life

Miller and his second wife live in Sonoma, CA and West Hollywood, CA. He has three grown children from his first marriage, and four grandsons. He continues to study jazz piano, music composition and still pursues his interest in computer technology, and medical science.

Miller maintains the personal blog Two Thirds Done (www.twothirdsdone.com). He has written that one of his greatest contributions to the future of technology is to document its past. This includes documenting the history of broadband.

Avram’s Congressional Testimony on HDTV 1998

Posted on April 6, 2013 by avram miller

It is hard to imagine that just only fifteen years ago, we still had not settled on the HDTV standards let alone deployed HDTV. Flat panel TV’s were just being introduced. I got my first a year later. It was 42 inches and did not have enough resolution to display HDTV and cost close to $5,000.

The House Commerce Committee Subcommittee on Telecommunications, Trade and Consumer Protection convened a 2 1/2 hour meeting to discuss HDTV standards and deployment issues on April 24, 1998. I was invited to give testimony. The panel was made up of a large group of executives representing the consumer electronics, the television broadcast and the cable industries. In addition there were two representatives from the computer industry, Bob Stearns from Compaq and me, from Intel. The chair was Billy Tamzin, a republican who later went on to make a fortune as a lobbyist. The ranking member from the democrats was Ed Markey (now running for the Senate in MA). Stearns and I had a couple of objectives. While most of the panel saw a TV, we saw a Monitor. We understood that with that if we could achieve high resolution and progressive scan, the HDTV set of the future could serve as a monitor for computers. Just like the CD and DVD, the consumer industry do the R&D and and manufacturing of important and innovative products which the computer industry would “highjack” for its own use. Everyone one on the panel had their own agenda and often it was a secret agenda. By the way, the guy who is looking is staring at me in the photos is Chase Carey the current COO of News Corp.

Here is my testimony followed by my friend, Bob Stearns.

Digital TV and Compression

Back then TV transmission was still analog. The majority of American homes no longer received TV over the air but instead they got TV content via cable including the so called Broadcast Networks. The move to Digital Television which allowed an ever greater number of television channels to be squeezed to a given amount of spectrum (bandwidth) had begun. It all started when John Malone declared the 500 channel Universe at a cable industry show in 1992. The bandwidth needed for HDTV required digital compression. One HDTV channel was the equivalent of four normal resolution channels. Digital Compression was first introduced by Direct TV who had a needed to get as many channels into their limited spectrum. The cable industry was looking to eventually distributed HDTV. By using digital compression, they could get between 1-2 HDTV channels in the same 6 meg hertz bandwidth normally used for standard definition analog TV channel. They soon realized that they could also squeeze between 4-10 standard definition channels into the same space depending on the quality that they would be willing to offer consumers. This turned out to be very important to Malone because TCI had one of the worst cable plants . This way they could avoid the cost of upgrading the plant by using digital compression to offer more channels with the same old bad quality.

A six mega hertz channel was converted to what was called 64 Quam. It was a packet structure and could be used for a combination of HDTV and standard TV. It was this technology that we hijacked to create the downstream portion of the Cable Modem. We could turn an analog TV channel into about 30 mbits which between a number of homes.

Open Set Top Box

The consumer electronics companies represented on the panel were interested in finding away to let consumers buy set top boxes directly from retail instead of getting them from the cable companies. For instance, Sony really wanted to be able to offer set top boxes direct to consumers that would integrate capabilities like DVDs. The cable Companies did not want this top happen. Even Circuit City was represented at this hearing.

Cable companies wanted to keep the set top boxes proprietary for a number of reasons. The charged customers $5-$10 a month for equipment that was not only cheap to make but keep in service for many years. In fact they are still doing this. They would claim that they needed to control the set top box to make sure that consumers were not able to access content they had not paid for. I was amazed to hear the representative from Time Warner Cable say that they were working hard to create an open standard for Set Top Boxes when I knew they were doing everything they could to prevent it.
The cable companies are promoting that they would open the set top box market and provide interactivity. There were only two major manufactures of set top boxes in the USA, the Jerold Division of General Instruments (now owned by Google) and Scientific Atlanta (now owned by Cisco). They were tightly controlled by the Cable Industry.

Broadcasters were concerned about the cost of HDTV and the Digital transition.

The major networks were concerned about the cost of both creating and distributing HD content. They really wanted to slow things down. Only PBS seemed to be aggressively pursuing the concept of Digital Channels and HDTV. But the government wanted to reclaim the spectrum which they provide free of charge to Broadcasters. It was a battle that went on for more than a decade.

Interactivity

I wanted to make sure that nothing would happen to interfere with the possibility of interactivity over cable. Interactivity required a return channel (upstream) which was actually the most difficult part of getting cable broadband access done. While the Cable Industry was buying into the concept of Internet Broadband for home computers, they did not want this to creep into the TV area. They wanted to be able to control TV interactivity just like they controlled TV content. By this time, I knew them well enough to know that they were not capable of pulling this off but saw no reason to rub this in. Instead, during the Q&A session, I gave an example of the kind of interactivity that I thought the cable industry and TV industry would find exciting. You can view those comments here.

http://youtu.be/Gm5s4NAZF6E

It is strange that now 15 years later, the kind of interactivity I was referencing still has not happened other then what is now called “second screen” where a companion device like and iPad or iPhone is used in conjunction with the TV.

Here is a link to the full session.

This is the formal statement that was entered into the record. My actual remarks at the hearing are more interesting, in my opinion.

Statement of Avram Miller Vice President, Business Development Intel Corporation Before the House Commerce Committee Subcommittee on Telecommunications, Trade and Consumer Protection
April 23, 1998: Hearing on Digital Broadcast Television

Mr. Chairman, and members of the Committee:

I thank you for the opportunity to appear before the Committee today to discuss the issues surrounding development and deployment of digital broadcast technology to American households during the next few years. In the interest of brevity, I summarize below the major points I wish to make regarding the promise that this technology holds for consumers of both traditional television programming and interactive data and media services and products.

We at Intel are persuaded that digital broadcasting win be a key element of growth in the computer industry, worldwide. It will serve as a carrier for enhanced television (video and data) as well as Internet services and products. As such, it will have a significant role to play in making interactive media a widely dispersed facility, available to a broader range of consumers than it is today. Every Internet user will benefit from expanded services — and that is the principal reason we are involved in this effort.

From the perspective of manufacturers and retailers of computers, digital broadcasting will expand the market for a wide range of computing platforms. It represents new applications for computing technology and a widely expanded base of new users. For Intel in particular, HDTVs high resolution displays will require high performance microprocessors to bring the full benefits of the technology to the screen.

Intel has fully supported the work of the Advanced Television Systems Committee (ATSC) that has diligently pursued the development of coherent and comprehensive standards for deployable digital broadcasting technology:

We have participated in the following ways:

- Defining technical specifications

- Integrating All Format Decoding (AFD) protocols into hardware

- Developing a variety of Intel Architecture based platforms that will be able to receive and decode broadcast video and data in all formats

- Ensuring the ability of broadcasters to deliver interactive video and data

- Developing Intercast technology and tools which allow the insertion of data into the broadcast stream (VBI). We have worked closely with broadcasters on this for the past three years.

We have also been involved in cross-industry efforts designed to facilitate a smooth transition from existing analog technology to the digital formats. Aside from embracing and advocating the AFD protocols, we have also sought to ensure the maximum possible ease of transition for broadcasters in the following ways:

- Ensuring that broadcasters will be able to exercise “Edge to Edge” screen control (allowing use of the entire screen to display content and brand information).

- Developing, through the Open Digital Content Initiative, “create once” standards that will allow one iteration of the digital data to be sent through multiple transports (satellite, cable, terrestrial) to play on any platform (desktop, set top box, PC, or TV).

- Facilitating the migration of existing video and data programs that are interactive from analog to digital formats (which will occur as broadcasters begin to deploy digital television market trials).

- Working with key broadcasters to facilitate trials. We have recently announced a cooperative program with PBS in which Intel will work to supply technical resources required for trials of digital broadcast of PBS educational content.

- Working to accelerate deployment of high bandwidth Internet connections through our advocacy of Universal Asynchronous Digital Subscriber Line (ADSL) technology, which allows high speed communications over existing copper telephone fines. ADSL will require specialized modems and switches at the terminus points of the connection, and in the transmission facilities. Telecommunication providers are the key to deploying this technology.

- Working with the Cable Industry to advance the implementation of these relatively lower cost solutions to the bandwidth problem so that PC’ s connected through cable facilities will be able to process more data than present technology would permit.

Certainly, difficult issues have at times divided the disparate parties involved in this complex development process. The issue of formats has been particularly mettlesome; the PC industry can support all 18 of the standard formats, but progressive display offers the best balancing of economics and “program acceleration”. It is clear that future digital television market segments will require data-enhanced programming.

Our goal is to serve the consumer of interactive video and data services. Digital broadcasting is not just a means to give the consumer advanced picture quality; it also presents an unparalleled opportunity to dramatically enhance Internet content and services for the public The key to success in this goal is the cooperative working relationship we are forging between broadcasters, the computing industry, and telecommunications providers.

To that end, our program has aimed at eliminating uncertainties (technical, product, and business issues) thereby enabling the development of the technology and its market. By serving as a bridge across industries (computing, television broadcast, consumer electronics, telephone and cable) and working diligently to develop “universal” standards that address the complex interoperability problems, we are succeeding in moving digital broadcasting closer to reality.

Intel has been driven by one objective: providing the consumers – “netizens”, students, parents, and small business owners — with a truly advanced technology which brings together the converging worlds of computing and interactive video and data, and which offers the highest quality of performance achievable, given the need for an orderly are moving steadily transition from existing analog technology. We believe that we toward the accomplishment of that objective.

The birth of Intel Capital

Posted on February 21, 2013 by avram miller

Intel Capital the Top Venture Capitalist

Intel Capital was named the number one venture capital “firm” for 2012 by PrivCo.

I feel proud of this accomplishment because I consider myself a co-founder of Intel Capital along with Les Vadasz. But then again, it is a bit difficult to accept that Intel Capital could be so successful without me😃.

So this seems to be an appropriate moment to document the early years of Intel Capital. Clearly this will be my perspective. I am sure that I will remember something incorrectly so let me apologize up front.

Avram Joins Intel

I joined Intel in August 1984 after being pushed out of Franklin Computer Company where I served as President and Chief Operating Officer (but in reality, I was pretty much the CEO). Franklin sold an Apple II clone and was growing faster than Compaq which offered an IBM PC Clone. We did about eighty million dollars in sales in our first year of operation but then Apple was able to successfully crush us via litigation. I won’t go into the details of what happened at Franklin. I have written about it else where in this blog. However, it is interesting to note that the key backer of the company, Jim Simon, graciously suggested to me at a dinner the two of us were having, that Franklin and I might both be better off if I resigned. We both recognized that while I might have done a great job growing the company, I was not equipped to deal with the major capital crunch that resulted from the Apple Litigation (our IPO was pulled and our bank line of credit cancelled). Jim went on to be one of the top Hedge Fund managers and is worth many billions these days. One of the other board members, Howard Morgan, a former Professor, who played a major role in recruiting me from Digital Equipment to Franklin, is the General Partner of First Round Capital.

A few months after leaving Frankin, I was contacted by Intel and asked if I might be interested in joining the company. An Intel employee named Mike Richmond (I owe him a great deal) had read about me and for reasons I still do not understand, thought I was the kind of person that Intel needed. He discussed me with Les Vadasz, (badge number three) who at that time was the head of what was called the Corporate Strategic Staff. Les was a change agent at Intel. His role in the success of Intel is terribly under appreciated. It was Les for instance that got Intel into the Micro Processor business.

I spent three days interviewing at Intel including an interview with Gordon Moore who was CEO, Andy Grove who was COO and many of the very top executives. My position was “strategic hire”. That mean that there was no specific job in mind but they wanted me to join Intel.

Avram’s Early Years at Intel

Since I came from the computer industry and not from the semi conductor industry, there was a major gap between my knowledge and capabilities and that of the other senior people. I decided to work out of the Intel facilities in Oregon because it had a small group that actually did computer systems of various sorts called “The System Group”. I reported solid line to Les Vadasz and dotted line to the Vice President that headed the System Group, Bill Latttin Interestingly, the CFO of the Group was Andy Bryant, the current Chair of the Intel Board of Directors.

I spent the next 3 1/2 years working on a number of projects that were systems related. The most important one was BiiN, a joint venture with the Sieman’s Corporation. Frankly, none of my accomplishments during those three years were very significant. I was not very happy with my choice to have gone to work at Intel. The company itself was not doing so well. It was primarily a memory component company and the Japanese were putting a lot of pricing pressure on the company. Having put my family through a lot of pain by leaving Digital Equipment Corporation and moving them to Pennsylvania so I could work at Franklin, I was was committed to making my Intel job a success.

Somehow, my work was appreciated. Once the joint venture was put together, I was was offered an opportunity to relocate to Silicon Valley and work out of the same building as Les, Gordon and Andy. Andy was now CEO. Paul Otellini, the current CEO was actually his technical assistant (the guy who made the powerpoint presentations). This was actually one of the key “executive training” positions.

Pre CBD Days

It was agreed that I would work primarily on Corporate Development which initially meant M&A, joint ventures, strategic partnerships and minority investments. By then, Les had taken over the System Group from Bill Lattin who left the company. The System Group was focused on becoming a major OEM supplier of PC’s to companies such as AT&T. In addition to being the head of the System Group, Les continued to have me report to him. Initially I focused on on M&A opportunities.

The primary area I wanted to focus on was networking technologies. This was was a field I loved and still love. I was convinced that the growth of computing would depend on the development of network technology. I started developing relationships with a number of the Intel board members and had an opportunity to meet with the board on several occasions which was a bit unusual at Intel. I remember giving a presentation about networking in which I used the automobile industry as an analogy. I explained how the gas companies were the ones that really pushed the development of the highway systems by building small demonstration “highways” and providing free maps, etc. The highway system was like networks and the cars were like the computers in my model. I explained that once the highways were built and laws were created to limit the driving speed, the auto industry found itself competing with racing stripes, car seat fabric and bumpers. A number of the board members at that time actually understood more about computer systems than did the management of Intel. This included Max Palesvsky (an amazing man) who was the founder of Scientific Data Systems.

I wanted to buy Cisco or 3Com but they were too expense for Intel so I ended up buying a small networking company called Jupiter Technologies who was lead by Jim Flash, now a partner at Accel. Later, we acquired a company called Lan Systems which was lead by Tyron Pike. It was very hard to acquire companies. The companies we wanted, we could not afford (or at least our board did not think so) and the companies we could afford, we did not want. I thought that by acquiring some smaller companies, we could both get some critical technical skills as well as entrepreneurial management which would help Intel create its own networking business. That did not work out at all. The Intel anti-bodies attacked the foreign objects and the reaction systems took over. The management of the companies did not really want to be part of Intel and they took off having accomplished little to help Intel develop a Networking Business.

I was slowly learning that M&A would not work at Intel. It was also clear to me that Joint Ventures were like running in a three legged raced with lots of coordination and little speed. Strategic partnerships could be useful but they were typically short lived with the exceptions of the symbiotic relationship represented by Intel and Microsoft. That pretty much left me with exploring minority investments.

David Yoffie, a well known professor at the Harvard Business School, was an advisor to Intel and then joined the Intel Board in 1989. David and I would discuss these issues a great deal. My thinking evolved and I realized that minority investments could both provide Intel with strategic insight and market impact without the issues of integration. So I started proposing minority investments. Later when we understood what we were doing better, we called them venture investments. I am not sure what the first investment was. It might have been Digital F/X, which was lead by my friend, Steve Mayer (the co founder of Atari). The very successful venture firm of Kleiner Perkins also invested. Vinod Khosla was that firms board member. I had a small staff. At the same time, Harold Hughes, the treasurer of Intel, was also interested in making minority investments. Tom Galvin worked for him and did some investments in semi conductor technology, I believe, but that activity kind of died out after a while.

In the meantime, I continued to make small investments. Les was able to get Andy to allocate $5,000,000 for minority investments. Andy himself would attend the meetings where the investments were approved. Frankly, he was not that constructive and after awhile, Les was able to convince him that he probably had better things to do with his time.

Les Goes on Sabbatical

Things were not going so well for Les as head of the System Group. Les went off to take a sabbatical where he taught at Harvard. Frank Gill took over. While Frank and I had a good personal relationship, he had no use for my little venture activity. In fact, he kind of thought it was not ok to earn money via minority investments. He was thinking of letting me go. Thank God there was another senior member of Andy’s staff, Dick Boucher, who was willing to take me and my group on while Les was away.

When Les came back about a year later, he and Andy decided that Les should focus primarily on venture investments. So Les created a group called Corporate Business Development or CBD. For a while, I was the only one reporting to Les and I continued to grow my group. Les and I had a great relationship (although there had been one rocky moment). Les was a Senior Vice President and I was a Vice President. I felt that we were partners and we were indeed as well as friends. We are still friends.

CBD Established

As our activities increased, I wanted to focus primarily consumer computing and networking. In 1992, I had come to the realization that the combination of home computers and high speed residential networks would become a new medium. I had funded the Intel Architectural Labs to develop what became today’s cable modem and DSL technologies. I wanted to invest in every aspect of what it would take to make that happen. Meanwhile, Les began to hire people who reported directly to him to deal with enterprise computing, semi conductors technology and even health.

My group continued to expand. As the internet took off, the value of our investments increased significantly. My group alone was sitting on many billions of dollars of unrealized gains.

We invested very early in companies like Broadcast.com (Mark Cuban), Verisign, Broadcom, Launch Media, Geocities, Cnet, and Covad. Later, we invested in CMGI and PCCW. We also invested in a lot of failures such as American Cybercast and 911 Music. The losers did not cost us much and the winners made up for the losses more than a thousand times. We passed on a number of companies that became very successful. Probably the most notable was Netscape. We had an opportunity to invest when that company soon after it was formed in 1994 had pre-money valuation of eighteen million dollars. Both Les and I thought it was too expensive. About a year later, it went public with a valuation of $2.9 billion dollars. We also had a chance to invest in Akamai in 1998 which had a valuation of $80 million dollars and went public a year later with a sixteen billion dollar valuation.

Strategy and Structure

As the number of deals increased, Les realized we needed to put some structure in place. He set up a formal process for deals with a number of well defined phases. As part of the process both the treasury dept. at Intel, which was being run by Arvind Sodhani (the President of Intel Capital wince 2005) and the legal dept., had to approve the deal. The job of the treasury dept. was to make sure that we would at least get our money back. The job of the legal dept. was to make sure Intel did not get sued. It was not always a fun process but it worked very well.

In the beginning we thought the primary benefit to Intel was strategic. We would have been happy if we just made a bit of money on our investments. But later, we realized that for a company to have strategic impact (help grow our market), it would have to be very successful and than mean we would receive a substantial return on our investment. That turned out to be much truer than we could have imagined.

The Liberty Media of Technology

As part of the effort to create residential broadband, I had a lot of contact with the cable industry. John Malone the CEO of TCI (later acquired by AT&T and then acquired by Comcast) was the major player in the cable industry. John cleverly created another company called Liberty Media which was spun off from TCI in 1991. Peter Barton was the CEO of the company and John Malone was the Chairman. Peter and I became good friends partly due to our interest in playing jazz piano.

Barton created billions of dollars in value with a staff of less than 20 people. They invested in early stage cable network companies such as BET, Starz, The Discovery channel, etc. They could then make sure these companies were successful by getting TCI to carry their programing. It was really brilliant.

For about seven years, I would attend the Allen& Company Sun Valley Conference where some of the most important CEOs of entertainment and consumer companies would be. Andy Grove also went on several occasions. Peter Barton gets it in to his head to try to convince Andy that he should give me a billion dollars or so to invest and create public company that would do for technology companies what Liberty did for cable networks. The conversation was pretty funny to observe. I don’t think Andy really got it. He also probably thought that I had put Peter up to it. Sadly, Peter died in 2002 at the age of 51 from cancer.

Avram Exits Intel

In 1996, I was diagnosed with Prostate Cancer and treated in the beginning of 1997. I had been thinking of leaving Intel and exploring the possibility of starting a leverage buyout company with Dave Roux, a good friend, who was responsible for Business Development at Oracle. There was a good chance I would have gone for it but once I had been treated for Prostate Cancer, I decided that I would not want to make a long term commitment to anything. From that point on I would live my life as if I only had ten years more to live. Ten years is enough time to accomplish something new like learn a language but it is not so long that one would postpone doing things that were really important. Dave went on to found Silverlake Partners, which was an out growth of the ideas he and I explored. Silverlake was a fantastic success and I would guess I would have been a very rich man had I joined him in this effort. Fortunately, I have been a limited partner in a number of their funds.

I did not see myself staying at Intel. It violated my newly created ten year rule. Les was nine years older than me and would be wanting to retire in the near future. He retired in 2003. I would have either have gotten his job or they would have put someone else over me. Both would have been awful. The head of CBD really had to be an inside Intel guy and I was someone that wanted to spend my time outside of the company. But then my health made the choice for me. My PSA did not go down after my radiation which is the expected result. Instead, it stayed the same for almost a year. My doctor was saying “at least it is not going up”. Then it started going up slowly. He would say “well at least it is not going up fast”. Then it started going up fast. You get the picture. It was looking like my Prostate Cancer had metastasized which was pretty much a death sentence. I took a three month sabbatical and then a medical leave of absence. My group was broken up and the people reporting to me went to work for other managers. I spent my last three months at Intel developing a presentation on how to grow CDB even more and how it could play an even more significant role in the development of Intel. On my last day at Intel, I presented this at a meeting of top management. I am sure that no one was really interested and probably did not care that I was leaving because “real men have a P&L and don’t make money by investing”.

Strategic Impact

We started CBD which later became Intel Capital to have strategic impact on Intel’s future. At first we invested in companies that could help our business units grow. Later, we realized that since Intel had about 85% of the PC microprocessor sales, we could help the company just by growing the over all market.

My focus was on the consumer market, which when I started, Andy Grove, said did not even exist. I knew that consumers would need high speed communication just like business. It was clear to me that combining high speed communications with powerful home computer, would lead to the creating of a new medium for information, education, entertainment and commerce.

Les totally agreed with this vision. He allowed me to take some money out of our investment funds to fund the Intel Architecture Labs to develop the technology now used by the cable and phone industries to provide residential broadband. We licensed some of that technology for stock options in various profolio companies and got a good return. But most important, we were able to be the drivers of residential broadband. That provided a prospect which allowed us to invest in key areas of this new and explosive market which resulted in amazing financial returns. More importantly, the growth of the consumer market fueled Intel’s growth turning it into one of the most profitable companies in the world by 1999.

But sadly, Intel did not take the opportunity to expanded it scope of business. It stayed primarily a microprocessor semi conductor company. It failed to develop the networking technologies of Broadcom (which we could have acquired). It failed to develop the communication technologies of Qualcomm (which we could have acquired).

I often wonder what, if anything, I might have done that might have changed this outcome. Intel was good to me. I owe the company a great deal. I wish I had left it with more.

The Bubble Bursts

One of the hardest things to do was to sell the stock of the companies we invested in even if they were public. The managers that were responsible for the investments believed in their portfolio companies and wanted to hang on for higher prices. They were also afraid that Intel selling their stock could undermine the companies and the trust they had with the management of those companies. I had a regular quarterly meeting with my staff where I forced decisions to sell stock. We took billions off the table that way.

I was no longer at Intel when the Internet bubble burst in the Q1 of 2000. I don’t know what happened to the the billions of dollars of unrealized investment gain that Intel had. I am sure billions were wiped out. Luckily for me, I sold all my tech stocks in the first quarter of 2000 including all my Intel stock at $72 a share. It has been trading in the$20s ever since.

CBD become Intel Capital and Continues

I don’t really remember when the name CBD was changed to Intel Capital. Les was made president of Intel Capital. Les and I are still close. He is an amazing man and I owe him much. He was my teacher in so many ways. I stayed close to those that worked for me at Intel both while they were at Intel and then after they left. My wife calls them my “Intel Babies”.

I left Intel fourteen years ago. It amazes me that Intel Capital has been about to continue and is clearly a great success. Much of this must be the result of the strong foundation that Les Vadasz created maybe I deserve a bit of credit too.

Drinks with Finis Conner leads to contemplating the future history of rotating storage devices

Posted on January 6, 2013 by avram miller

1980 – The world’s first gigabyte-capacity disk drive, the IBM 3380, was the size of a refrigerator, weighed 550 pounds (about 250 kg), and had a price tag of $40,000( $113 thousand in present day terms ^[13]), 2.52 GB

1980 – ST-506 first 5¼ inch drive released with capacity of 5 megabytes, cost $1500

Last week, I was contacted by Finis Conner who is best known for his career in the disk industry (more later). I have known Finis since 1980 and we have communicated off an on during this vast expanse of time. We had a drink and talked about the early days of personal computers as well as the future of mobile computing. I have always liked Finis as a person. He has a warm and engaging personality. And he, like me, has dared to put his vision to the test time and time again.

The Story Begins in 1980

This story begins sometime in 1980. I was working at Digital Equipment Corp as a Senior Group Engineering Manager and I was responsible for the low end computer hardware group. I had joined the company in the summer of 1979 when I returned to the United States from Israel. For those that were around and can still remember, my group did the engineering on all Q-bus computers as well as Decmate (word processor).

The Central Engineering organization led (maybe that is too strong a word), by Gordon Bell, had a yearly strategy meeting off site. In those days, such meetings where called “woods meeting” because they happened in either Massachusetts or New Hampshire at some hotel located in a forest area. The senior managers of the Central Engineering Organization would nominate the individuals they thought were the brightest and had the most promise to participate. I was invited to attend. It was a two day event, I think. Outside speakers/presenters were invited.

At this meeting, the legionary Al Shugart spoke. Al had an amazing career spanning 45 years and did more than anyone to create mass storage for personal computer. His career began at IBM (1951) working on Winchester Drive Technology for Mainframes. Later he worked for Memorex, a mainframe disk manufacture. In 1973, he started Shugart Associates which pioneered the floppy disk, first with 8-inch drives and then introducing a 5 1/4 inch in 1976 (the capacity was 87,5k). Al was forced out of his own company in 1974. He moved to Santa Cruz and opened a bar with a friend and bought a fishing boat. Sometime around 1979 Finis got the idea for the 5 1.4 inch drive. His concept was that if you could create a drive in the same form factor as a 5 1/4 inch floppy drive, you could replace one of the two drives that personal computers had with a hard disk. In 1979, he approached Al Shugart with the idea. Together they founded Seagate Technology with only $1,500,000 in venture capital. Seagate went on to become the largest independent manufacture of disk drives.

Back to the Central Engineering Woods Meeting

At that time, I really did not know any thing about disk technology. Digital Equipment had its own disk engineering group run by Grant Saviers and a manufacturing group run by Bob Peffer. I remember that there as a disk called the RL02 which was sold with PDP-11s at that time. It was 10MB. It think it was a 14 inch disk but I am not sure. The disk itself was actually removable which was important. If you had at least two of these units you could back up your disk quickly. Otherwise you had to use DecTape which had a capacity of 258k per tape. Digital, like all computer companies at that time, was pretty much vertically oriented in the sense that it designed, manufactured and sold all the major components including software that made up their computer lines. That meant the company had a memory group, a printer group, a disk group, a terminal group, and an operating system software group. Little did we know at this Woods Meeting, that the structure of the computer industry was about to be turned on its side and Digital would slowly slide into the abyss. I was 35 years old at this time and Al was about 50.

I become one of the first and largest customers for a short time

So Al gets up to talk and educates most of us about disk technology. Then he pulls out a 5-1/4 inch Winchester drive with a capacity of 5 mega bytes that his company was developing. I was blown away with the concept and since I was involved in making small computer systems, my brain lit up with the possibilities. After his talk, almost no one went up to Al. I was surprised at the lack of interest. I went up to him and introduced myself and we chatted for a few minutes. We exchanged business cards and he said he would follow up with me. I think, soon after, I was contacted by someone in his sales organization. A month or so later, I was selected by Ken Olsen to lead the development of personal computers (we did not call them that). Knowing about the 5 1/4 inch disk effected my thinking greatly. Ken wanted me to build a product that only used floppy disks. This was driven by cost factors and because Ken had little understanding of software. I did develop such a product called the Professional 320 but my heart was in a hard disked based product called the Professional 350 which would feature a built in 5 1/4 inch Winchester drive. Both products failed in the market place for many reasons which I have already written about. And in some ways, the IBM PC, which was release a year after I started the CT program (the code name for our effort), proved Ken right but not for long. In 1983, IBM launched the IBM XT which featured a Seagate drive. Apple also used the Seagate drive (but not the electronics) as an option for the Apple III and later the Lisa.

Going outside for a Disk

Soon after Al’s talk, I learned that Digital’s Disk group was developing a competitor to the Seagate drive. It would never had occurred to that group to go outside for a complete drive. I felt that the group would never deliver on time since they started much later than Seagate. So in order to use the Seagate drive, I went to them and pleaded with them to go directly to a 10mega byte drive, committing that I would switch over to their drive as soon as they got it done. I told them that they would leap frog Seagate that way. Later, when Seagate announced their 10 mega byte drive, I persuaded the Desk Group to move directly to 20 mega bytes. You probably have the idea by now that I did not really want to reply on Digital as a supplier. I had to do the same thing with the printer group but that is another story.

I think it is important to stop for a second and pause on the size of this disk. 5MB is less then the memory used for the average photo we take today with a digital camera. The Seagate drive probably cost end users about $2,000 in todays dollars. Today we can buy a terabyte drive which is 200,000 times as large for less than a $100. In other words, it would have cost more than a million dollars to have a mega byte of storage in 1980

Now it cost about ten cents. Gigabyte cost

Sell, Manufacture and then Design

The drive was not without its problems. While most product development started with design, then went to manufacturing, and then was marketed and sold, Al had reverse this by selling the product, then manufacturing and finally getting around to designing it

Eventually the product worked as specified.

Seagate Goes Public with my help

Sometime in Aug. of 1981,I got a call from Finis, Al Shugart’s partner asking if I could place an order for something like 1,000 units which was valued at a million dollars. Al wanted the order on the books because the company was going public in about a month. I said I would do my best and was able to get the order processed in time. Of course, such a conversation these days would not be permitted by the SEC. Finish, tells me that he cut a deal with the buyer from Digital at the Crow’s Nest restaurant in Santa Cruz. He wrote out his offer on a napkin and agreed to sell Dec the 5MB drives over three years starting at $525, then $500 and finally $475 in the third year.

The only major company to actually ship the Seagate 5MB drive was Apple. They bought the drive but not the electronics from Seagate and sold about 20,000 units at a list price of $3,499 (they only paid $400 for the drive). Seagate only manufactured 25,000 units that year. Finis deal with Steve Jobs on the Apple product (Steve was not the CEO at that time-Michael Scott was).

Later IBM would become the biggest customer with the introduction of the IBM PC XT. Finis signed the deal with Don Estridge who unfortunitly died in the crash of a Delta flight in Dallas in 1985.

The Pro 350 did not ship until early 1983 much later than originally planed. Just after that, I left Digital to become President of Franklin Computer, an Apple II clone company that did 80 million dollars in sales in its first year of operations before being crushed by Apple in a lawsuit. By April, I was out of Franklin, pushed out but happy to go. We did have a clone of the IBM XT underdevelopment but never released. I saw Finis from time to time at industry meetings. In 1985, he started Conner Peripherals.

Finis goes on to start Conner Peripherals and pioneers the 3 1/2 inch drive

Finis left Seagate and started Conner Peripherals in 1985. Soon after, that company merged with CoData which developed the first 3 1/4 inch disk. The company did very well and had revenues of more than 1.3 billion dollars by 1990 and was eventually acquired by Seagate in 1996. After than Finis started two more companies, Conner Technology which manufacture 3 1/4 inch disk in China but was not successful, and BluStor where Finis is still CEO. Al Shugart died in 2006 at the age of 76.

iPod Changes everything with a 1.8″ drive (2001)

I am not going to go into this now but clearly the introduction of the iPod with a 10 gigabyte hard drive (20 years after Seagate introduced the 5 1/4 inch 5MB drive) was a major discontinuity in the evolution of computing and broke the hold of desktop/notebook computers.

The Future of Disk Capacity and the end of the consumer disk industry

There is no reason to think that disk capacity will not continue to follow Moore’s law and grow exponentially for, lets say, at least the next ten years. I just bought a new Mac which has the new Fusion Drive which combines a one terabyte hard drive with a 256 GB flash memory. In ten years, we could expect to see two orders of magnitude increase. That means I would have a 100 terabyte hard drive and a 25 terabyte flash memory. But what would I do with such a capacity especially since my internet connection will probably be between 100 and 1000 Mbits? Movies are the content that uses the most capacity. An HD movie can be easily compressed into 7 GBs on average. Lets make it easy on ourselves and say that the most we will need for the average movie will be 10 gigabytes. That means we can store a 100 movies in one tera byte or 10,000 movies on the hard disk that I could theoretically have in 2013. But that makes no sense when I will be able to stream any movie from the internet with the same resolution. I would never buy 10,000 movies and even if I was so inclined, I can’t imagine ripping or illegally down loading 10,000 movies (although I have one friend who would try to do this). I certainly could not use up the storage with photos. So what is going to happen? I think consumers will slowly move to all solid state (flash) memory. We will see the consumer hard disk go the way of the tape drive, floppy disk, and optical disk (DVD). There is no longer a disk in any IOS device like the iPhone or iPad. My Macbook Air does not have a hard drive. I am not sure what will happen with the disks the will be used to store things on the cloud.

Could Qualcomm really buy Intel: It is all Heddy Lamar’s fault

Posted on November 10, 2012 by avram miller

Origins of Intel Capital and its mission

Learning today that Qualcomm has a market capitalization that is now greater than Intel’s, makes me a bit sad and disappointed in myself. When Les Vadasz and I started Intel’s Corporative Business Development Group around 1991, now known as Intel Capital, we saw it as a strategic vehicle. I had started making minority investment a few years earlier after giving up on the idea of using acquisitions to grow the company. Les and I thought that by investing in early stage companies, Intel would gain insight into the future which would impact its strategic direction. Since our objective was strategic, we would have been happy with just getting a good financial return. Instead we got a fantastic financial return (when I left Intel in 1999, Intel was arguably one of the most if not the most successful venture capitalists). The disappointing part is, as far as I can see, there was no impact on Intel’s strategy for the future and results are clear to be seen now. We did have major impact on the computer industry on the other hand, particularly in the development of residential broadband and consumer Internet.

Qualcomm market Cap greater than Intel’s
The market capitalization of Qualcomm at more than 100 billion is now higher than Intel’s. This would have been unthinkable in 1991 when I first meet with the founders of Qualcomm, Irwin Jacobs and Andy Viterbi. It reminded me of the time in 1982 when I was a group manager at Digital Equipment Corporation, the second largest computer company in the world, and met the CEO of an early stage company called Compaq. How could I have guessed then that sixteen years later, Compaq would acquire Digital only to be eventually swallowed later by HP ten years after that.
I was extremely impressed with the Qualcomm people at that meeting. Les Vadasz, my boss at Intel and badge number three was with me as were a number of other Intel people but I no longer remember who they were. The Qualcomm folks first gave us an amazing tutorial on CMDA (Code Division Multiple Access) the technology they were developing for mobile phones. At that time, cell communication was analog. The primary technology deployed in the USA was called AMPS for Advanced Mobile Phone System. At the same time that Qualcomm was developing CMDA, while another technology was being developed primarily in Europe called GSM. GSM was very successful and is still the primary communications standard for most of the world.

CMDA and Heddy Lamar
CDMA uses a technique called spread spectrum. I can’t go into it here and frankly, I am not sure I can explain why I thought that CDMA was the technology of the future other than to say it was clear to me that it was both more secure and would provide higher bandwidth for data (and remember this is 1990). Before leaving the technology discussion, I have to point out the role that actress Hedy Lamar played in the development of the idea. Here is something from the Qualcomm site about this:

Once described as the most beautiful woman in the world, actress Hedy Lamarr was one of Hollywood’s most glamorous silver screen goddesses of the 1930’s and 40’s. But Ms. Lamarr had another talent: she was brilliant.
Working together with avante-garde music composer George Antheil, Lamarr came up with the notion that multiple frequencies could be used to send a single radio transmission – a concept that’s now known as frequency hopping. The concept would eventually provide the basis for the CDMA airlink, which Qualcomm first commercialized in 1995. Today, CDMA and its core principles provide the backbone for wireless communications, thanks to the creative vision of one extraordinary woman. “Films have a certain place in a certain time period, but technology is forever.” – Hedy Lamar

The possibility of an Intel investment in Qualcomm
At the same Qualcomm meeting, Les and I were briefly introduced to Paul Jacobs the son of the then CEO and founder Irwin Jacobs. Paul was responsible for another part of Qualcomm which was developing an email system called Eudora. I am not sure why Qualcomm acquired Eudora from The University of Illinois where it had been developed. Perhaps, they saw the possibilities of mobile email. Paul Jacobs is now the current CEO of Qualcomm.

I was interested in having Intel invest in Qualcomm. As readers of my blog will know, I was always passionate about communications/networking technology. I thought these people were brilliant and had very complimentary technology capabilities. It would also provide Intel with a relationship in the San Diego area where so many communications companies were located also seemed attractive to me. But I certainly did not make the sale at Intel. I am not sure it even got much further than Les Vadasz. It is no longer clear to me why there was a lack of interest. I suspect that it just felt too far away from our core business which at that time was selling microprocessors to manufactures of desktop computers. It might have been difficult for those that understood anything about mobile technology to imagine that CMDA could compete with GSM which had much more support. While CMDA never really beat GSM it allowed Qualcomm to develop its capabilities and to increase its patent position. Over time, Qualcomm became the leading supplier of mobile communications technology with customers like Apple. Qualcomm was the 7th leading semi conductor supplier in 2011. In 2005, Paul Jacobs became CEO of Qualcomm, the company his father, Irwin Jacobs founded and led.

So back to the Intel/Qualcomm story
Since I could not get Intel interested in Qualcomm, I decided to buy Qualcomm stock in its IPO in 1991. Unfortunately, I sold a few years later. The market cap is now a bit over 100 billion. It was about 400 million in 1991. Today, Intel’s market cap is slightly lower than Qualcomm. When I left Intel in April of 1999, the market cap of Intel was $218 billion. At that time Qualcomm was valued at 26 billion dollars or one 10th of Intel’s value at that time. Qualcom market cap was only 4 billion dollars the year before.

Two lost opportunities that could have changed everything for Intel
In the late 90s, there were two companies that Intel should have acquired in my opinion. One was Qualcomm. The other was Broadcom which had a market cap of one billion in 1998. Intel did have an investment in Broadcom of some significance. Broadcom is now worth 17 billion. By owning these two companies, Intel would have the leading position in broadband and cellular communications instead of just owning an aging microprocessor architecture. But instead Intel has done nothing of significance. They have just been milking their microprocessor business. Winning Apple’s Mac business was a major success but Intel was not able to get the more important part Apple’s business which is the i-Devices. I suspect that Apple will replace the Intel microprocessors with their own chips in the next 3-5 years and even the threat of this will put major pricing pressure on Intel.

Over the years since I left Intel, I have suggested to some of the Intel executives that they consider acquiring Qualcomm but the response was always, it was too expensive. Well the market has thought differently. If anything, it has thought that Intel was too expensive.

So will Qualcomm acquire Intel?
I doubt that they will do it. Qualcomm will continue to grow while Intel will eventually end up a semi conductor foundry where Apple and other’s will have their chips manufactured unless they make some major changes. How sad! I am sure that many of my former Intel colleagues will disagree with my point of view but the numbers speak for themselves. Interestingly, if it did happen, the CEO’s first name would still be Paul.

Smart TV 1995: sponsored by the Software Publishers Association whose motto at the time was “Don’t copy that floppy”.

Posted on September 28, 2012 by avram miller

The Computer Chronicles
PBS had a television show called the Computer Chronicles which ran from 1981-2002.
There is a particularly interesting episode and one that relates to my recent post “When Technologies Collide“. The title of the episode is Smart TV 95 and it was recorded in 1995. It is a pretty amazing piece of history which was captured by the Internet Archieves. It is about 25 minutes long and is worthwhile watching especially for those interested in Interactive TV.

In 1995, most people in technology were convinced that the TV would be the interactive device in the home. Well things turned out very differently. The PC became the interactive device. Now we are pretty much at the end of that road and entering the period of ubiquitous computing. Finally the TV is joining the world of interactivity, seventeen years after this TV show was made.

Vertical Blanking Interval Goes Nowhere
The first company interviewed offered a board that could be plugged into a PC. It had an antenna and could receive television signals. It was designed to use the Vertical Blanking Interval (VBI) that existed in analog television. It was a small amount of video signal that ironically could not be used for video for reasons I will not discuss here. A number of companies tried to use this capability, including a project at Intel (not one of mine), and they all failed.

Convergence 95: A conference of losers
Then there is a discussion of a conference called Convergence 95 where a bunch of companies dealt with the concept of Interactive Television. In attendance were equipment suppliers who had hoped to provide interactive set top boxes and OS companies that wanted to become the Microsoft of the set top box. Even cable channels like Discovery were present, talking about how to offer interactivity along with their programs. Frankly, most if not all the companies present were losers. Some of the concepts did not make sense and some have still not been implemented 17 years later.

HP demonstrates a set top box and cable modem and fails at both
Next, HP demonstrates a set top box that ended up going nowhere. They also demonstrated a cable model which was based on the technology that we developed under my direction at Intel. HP failed to take advantage of their early lead in cable modems but then again, so did Intel.

First Cable Modem Trial a Major Success
Next there is a discussion of one of the first cable model trials which was done in Castro Valley CA. The trail was done by Intel and Viacom who at that time owned some cable companies. Video of a school in Castro Valley is shown. The class is using a cable modem to retrieve high quality images of earthquake faults at high speed.

One Person Got it Right, Guess Who
At 16:45 minutes, I am interviewed . You can see this clip here where I make the case that the PC is designed for interactivity, not the TV. One of the more important points I make is about the poor resolution of TVs at the time.

High Resolution Video on a PC makes its debut
Finally there is a discussion of video on computers. In 1995, it was very difficult to display high quality video and synchronized audio. That is pretty hard to imagine now in the era of youtube and Netflix. I can remember the efforts of the Intel Architecture Labs (IAL) to be able to render video in real time just using the CPU of the computer. This project was called Native Signal Processing. It was the holly grail for the labs. It was not many years later that we began to experiment with real time encoding/compression of video. Seeing that for the first time, I realized that it would be possible to record and store television just as we were already doing for audio and that would allow advertising to be stripped out of video and change the nature of the TV industry.

Smart TV 2015
Since 1995, there have been many attempts to develop interactive TV. With the exception of game platforms like Wii and the xBox, they have all failed. Periodically, some company tries again. Google is the latest to fail with Google TV. Companies with the more modest goal of providing linear content over the internet like Apple TV, Roku and Netflix have had success.

There are many rumors about a TV from Apple. Steve Jobs talked about figuring out how to do to the TV what the iPhone did to the cell phone but no one is sure what his brake-through idea was.

We now have the concept of the the second screen. The idea is that you use your smart phone or tablet to interact while you watch linear television. Zeebox is an example of this concept. While I think this will happen, I don’t think it is the real breakthrough.

It is now possible to clone your iPad display using the Apple TV. Maybe the winning architecture is just to keep the display the display but make it open to getting its content from many devices.

It is interesting to think about the role of key computer companies as this evolves. I believe Google, Apple and Amazon will be come the domineer players in Interactive TV. They are the new media companies. The current networks/studios will see their roles reduced. Note, I did not even mention Microsoft. They could have a role but given their current leadership, I doubt that they will have any importance in shaping the future of TV. As for my alma mater, Intel. There will be no Intel Inside the Smart TV.

WhenTechnologies Collide: The Next Wave of Computing

Posted on September 8, 2012 by avram miller

This is an amazing graph from GigaOm (see story here). As readers of my blog know, I played a very significant role in creating residential broadband starting in 1992 and continuing until 1999, when I resigned my position at Intel as Corp. Vice President of Business Development. While I was sure then that the Internet would change everything, I could not have predicted these results. Apple was still struggling after Steve Jobs’ return and had a market capitalization of just eight billion dollars. Amazon had a market cap that was more than twice as high but was basically a book seller. Google had just eight employees and was based in a garage. Microsoft’s market capitalization was about 270 billion. It had the highest market capitalization in the world, a position now occupied by Apple. By the way, Intel’s was about 150 billion. Both of these companies have about the same value now as they had 13 years ago.

The PC Revolution Turns the Computer Industry on its Side
Microsoft, Intel, Dell, Compaq (which became part of HP after first acquiring Digital Equipment Corp a leader of the previous generation of computer companies) were all products of the PC revolution. Apple was not (more on this later). The PC revolution is an example of what happens when two major and to some extent un-correlated technology discontinuities collide. The PC industry happened because an independent semi conductor industry lead by Intel met up with an independent software industry lead by Microsoft, and unleashed by accident by IBM. That flipped the computer industry. Until that time it was pretty much a vertical where the major computer companies developed all their own technology from disks to operating systems. It was a world of proprietary architecture. The leading companies where IBM, Digital Equipment Company and HP. Because both Microsoft and Intel were willing and eager to sell to anyone, many companies were formed such as Compaq and Dell to offer PC products. These companies developed little in the way of unique technology. In fact, to some extent, their innovations were in sales and marketing strategies. I should also give credit to the disk industry which was lead by Seagate in the early days, but this industry did not play a leading role in creating the market. The difference was that both Microsoft and Intel had near monopolies (we were taught not to say that word at Intel) on their segments ,while the disk and memory industry had many players and never generated enough profit to be market leaders. At one time it was thought that Microsoft and Intel had 120% of the profit of the PC industry (meaning many companies participating in the industry actually lost money).

The House of Wintel
While Intel and Microsoft can both take credit for exploiting the opportunity that was created by the collision, neither company had that much to do with the other in the early days of the PC revolution. In fact, each company would have preferred to see the other weakened and would actually take action from time to time to try to accomplish this. I remember that twice Intel had worked with Apple using Intel programers to convert the Mac OS to run on Intel Architecture (x86) during the 90s when the Mac ran on PowerPC chips only to have Steve Jobs decide not move to Intel. Steve probably was just leveraging Intel to put pricing pressure on Motorola who was the main supplier of the Power PC chips. Intel also had an active Unix effort which drove Microsoft nuts. Microsoft would refuse to take advantage of advanced features of Intels’ new microprocessors. Microsoft even invested in a company called MicroUnity whose mission was to create a new microprocessor architecture that could leap over anything Intel was doing. The company made amazing claims but failed to live up to them. Anyway, not all was cozy in the “House of Wintel” as attested to by my friend, Steve McGeady, a former Intel Executive when he testified at the Microsoft Anti-Trust trial in 1998.

The Internet Meets Broadband
Around the middle of 1995 two other technology trends were slated to collide. They were residential broadband and the Internet. The early stage of residential broadband (Cable modems and then DSL) was driven primarily by Intel under my direction. At the time we started the development of cable modem technology in 1992, I was aware of the Internet. Mosaic, the first browser developed at the University of Illinois by a team directed by Marc Andreessen, was released in 1993. Netscape Navigator, the first commercial browser was released towards the end of 1994. I had a chance to invest in Netscape at a pre-money valuation of eighteen million dollars, which I passed on, thinking it was too expensive -one of the greatest mistakes I made as a venture investor. At that time, the internet was mostly used by engineers and academics in universities, businesses and government. Corporations used things like cc:Mail and Lotus Notes. Consumers were just beginning to use email within online services like AOL, Prodigy and CompuServe. But both the business and consumer services were proprietary and it was not possible to communicate between them. However, for a number of reasons, gateways were created to allow email to be sent out of these “email islands” to the internet and from there it was possible to connect to other islands.

Residential Broadband the Child of TV
Residential broadband was build on a platform that was created for Television Transmission. The key ingredient that made broadband possible was the development of Digital Cable Transmission of video. General Instruments, who became Intel’s partners in creating residential broadband for the cable industry, demonstrated the capability to convert analog video to digital in 1989. The cable industry was excited about the potential of this capability and in 1992, John Malone, the CEO of TCI and, at the time, the de facto leader of the Cable Industry, coined the phrase, “the 500 Channel Universe”. I am sure that he never realized at that time he was laying the foundation for the multi million channel universe that is today’s internet.
Coupled with this was the development of High Definition Television which was to use the same underlying technology. I have repeated this story on my blog many times so I will not go into a lot of detail here. Matt Miller, the CTO of General Instruments and I, came to the realization that interactivity would take place in the home via personal computers and not interactive TV’s and very importantly, that we could use the very same infrastructure developed for digital television to create a broadband network for PCs. Our respective technical teams worked together to develop early cable modems and head-end equipment (the equipment that was located at the cable operators site). Intel developed the cable modem communications protocols which we provided to the Cable Labs (the R&D arm of the cable industry). I evangelized the concept of residential broadband, meeting with the CEOs’ of all the major cable companies, and introduced the concept throughout the world. Intel licensed manufacturers of cable modems such as Cisco and HP. The rest is as they say, is “history”.

The Web Evolves as the New Platform for Computing and Business Models Change
After a few years, it was clear that the internet would become the online platform of choice for consumers and that applications would be based in the world wide web (www). From the perspective of Intel and Microsoft, the growth in home computer sales driven in large extent by the availability and acceptance of broadband internet was a good thing. But contained in this good thing was something else. More and more of the value derived from using computers in the home was being transferred to the products and services running on the Internet or as we now say, the cloud. Having a high speed network, wireless access in the home, and a great monitor was more important then having a fast CPU.
Business models were changing. Previously, consumers bought hardware and software. Now, new elements were being introduced into the mix. Consumers were paying monthly subscriptions for access to services like broadband or even music sites. Importantly, advertising started to appear on the internet. At the time, 1994, I said “advertising will be the killer app of the internet”. Companies like Intel, Microsoft and Dell were being left out of these growing segments of revenue. I remember in the mid 90s, speaking to Paul Otellini’s staff at one of their strategy sessions. Paul who is now the CEO of Intel was running the Microprocessor business at Intel then. I shared with Paul and his senior managers, some of my thinking about the future of the computer industry and introduced the concept that companies could subsidize the purchase of consumer products if they could couple them with re-occurring service charges. I said this kind of connection between hardware, software and services could change the business model of the computer industry. It took the iPhone to make this concept happen. Intel was not in a good position to take advantage of the changes that would follow. While the company had a very important position with respect to consumer awareness resulting from the very effective “Intel inside” campaign, it had no direct relationship with consumers. I wanted Intel to start selling peripherals (something that Microsoft did) but frankly that would not have helped much.

The Writing on the Wall for Intel
By the time I left Intel in 1999, the writing was pretty much on the wall. I left partly in frustration that I was not able to get Intel to understand that we were entering a new phase of the computer industry. But frankly, I am not sure I could have made suggestions that would have changed the outcome. I would like to think that had I stayed at Intel, I would have convinced the company to acquire Qualcomm which today has a market cap close to that of Intel, but I am not sure. I think Microsoft was in a better position to bridge the transition but because so much of the value became software based, it would have taken very different leadership than that provided by Bill Gates and Steve Balmer. Even companies like Cisco whose income was primarily derived from selling products to companies that provided internet infrastructure did not take advantage of the transition. Intel needs to find away to couple its primary product, the microprocessor, to the services consumers would be enjoying. About five years, ago, I figured out how to do that and offered my ideas to Intel (without charge). They were not appreciative and never took my suggestions seriously. Probably worked out well for me because I could have gotten sucked back into Intel.

Amazon the Emerges as a Leading Competitor to Apple
Amazon is also on the chart. Amazon is not really a computer company although it is moving quickly in that direction. It is an online retailer. Its’ competition is other retailers including Target and Walmart. It started in the book business and has pretty much succeeded in wiping out traditional brick and mortar book sellers (sadly in some opinions). It is having a major effect on the way all media is distributed. But in my opinion the best is yet to come for Amazon (by the way, I own the stock). Amazon is trading at an all time high as I write this post.

Google from Brilliance to Mediocrity
Google has done an amazing job monitoring the internet via advertising. They are, of course, the leader in internet search. But Google reminds me of of Microsoft. They have a dominate market share and a fantastic financial engine. But their products are mediocre. Their offerings in every segment other than search is not very inspiring. Even hotmail and yahoo have more email users than gmail on the web. Apple has the most email clients on mobile devices. I recently said in a talk that I gave that “Google has the mediocrity of Microsoft without the greed of Bill Gates”. They may be in a good position to take advantage of the next wave of computing which will be described later, but I personally doubt that they will.

Apple the Company I Hate to Love
Finally, I have to talk about Apple the company I loved to hate and now hate to love. As readers of this blog will know, I have a twisted history with Apple. It started with meeting Steve Jobs in 1982 when he was just 25 years old, continued through the lawsuit between Franklin Computer where I was president. Apple pretty much killed the company via litigation. I have written much about Steve Jobs and Apple on this blog (do a search if you want to see those posts). Apple, until recently, belonged to the pre-pc era of computing. While not a totally vertical company, Apple controlled most of the technology in their product. In many ways, Apple reminded me of Digital Equipment Corp., they were the leader in mini computers. Obviously, there are key differences. Apple focused on creative professionals and consumers while Digital focused on Engineers and Scientists. Driven by their respective CEOs Ken Olsen and Steve Jobs, I believe they were building computers that they would want to use themselves.
What has fueled the astounding growth of Apple is that they are riding the next wave of computing. A phrase coined by John Gage, formally of Sun Microcomputer, sums it up: The Network is the Computer. But I want to add another concept: Ubiquitous Computing. This means that everyone and to a lesser degree everything is connected and intelligent. I believe this is actually gives rise to the driving factor of what we now call Cloud Computing. The driver of Cloud Computing is reduction in complexity. There are other benefits I am sure, like reduced cost, but reduction in complexity is the driver in my opinion.

Just take the issue of accessing content. Consumers started ripping music CDs to their computers in 1992. Digital Compression made it possible for us to store a lot of music on our computers. Then small portable music players came our way that allowed us to take this music with us. Most of these devices were pretty poor until Apple applied its amazing design capabilities and created the iPod in 2001. Keeping music synced between a computer and an iPod was not to difficult or complicated. iTunes was developed with this purpose in mind. But as I am sure you have experienced, as you try to involve more and more devices (multiple computers, portable players, and devices to drive home Audio/Visual systems) things get rapidly more complicated.

Eventually, Apple figured out that it is less complicated to store everything in one place “in the cloud” and have every device communicate with the cloud and not directly with each other. But in doing this they are not really utilizing the open platform that is the internet. They are just using the Internet infrastructure much in the way that the cable modem used the Cable TV infrastructure.

Computers and Computing Everywhere
Ubiquitous Computing is driving other key technologies. Most prominent in this is mobile communications and form factors. There is another force that will shape the future of computing and that is security for want of a better word. As we put more and more of our information in the cloud we become more and more concerned about the security of that information. I don’t just mean information theft. I also mean our ability to access information now and in the future.

When Technologies Collide Money is Made
I started this post talking about what happens when technology discontinuities collide. I would like to give my views on the next wave of computing. You can guess that Ubiquitous Computing which will be the driver of Cloud Computing is one of these discontinuities. But what are the others? I think Network Intelligence will be one. What I mean here is the application of data mining to personal interactions. There is evidence of this already with data mining and crowd sourcing. Amazon suggests things that I might be interested in buying from looking at my buying patterns and those of others like me. The same is true for Netflix. Pandora uses Network Intelligent to suggest music I might like. Much of these capabilities are being used to market to us. But this is just a start.

Just think of all the information that a company like Apple will have about us. It will be interesting to see if the regulatory structure can deal with the access such a company will have to our information. I for one am not overly concerned, but maybe I should be. The company that has the most information at the moment is undoubtably Google. But they will have to recast themselves as a Network Intelligence Company.

I have a lot more to say on this topic but that will have to wait for future posts.

Facebook does not Make the Cut…
Finally, you may have noticed that I said nothing about Facebook. This is partly because Facebook was not on the graph but also because I think Facebook is the Yahoo of the next wave. This statement my surprise some of you because of Facebook’s strong position in Social Media. I personally spend a lot of time on Facebook and do believe in the future of Social Media but in the mid 90s I spent a lot of time doing email on AOL. I still spend a lot of time doing email but have not been on AOL in ten years.

Two Thirds Done

thoughts of a 68 year old boy

Category Archives: Technology