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
I am assuming that you are correct which means
the share prices are cheap.
I think you got Paul right. Will withhold “intuition” on the resurrection of Wintel until you complete the thought. Yes, a winning record matters, but if you don’t have a clue why you think one way and why another (with a similarly winning record) thinks another, there is no means to make a decision.
Pingback: The Resurrection of Wintel Part 2 | Two Thirds Done
Pingback: The Next Wave of Computing is Rising | Two Thirds Done