Selling Silicon By the Ton

When I joined Intel in 1984, it was primarily a semiconductor memory chip company.  I use to joke that it sold silicon by the ton, but that was true.  Then, the memory business was under attack by the Japanese because it was a commodity, and the Japanese were just better at manufacturing and therefore had lower costs and a longer time horizon.  I remember driving the now deceased Andy Grove to the airport and he told me he was afraid that Intel might not survive, and perhaps it would be best to sell the company to one of the Japanese competitors.  Intel’s revenue was just over a billion dollars and I think the market cap was the same.  It would have barely qualified as a Unicorn. 

Finding the Vein of Gold

A few years later, Gordon Moore who was still CEO and Andy Grove who was COO famously decided that they had to transition the company from the memory business to the microprocessor business. They really had no idea at the time what this would lead to. The PC industry was still in its early phase of development.  This decision resulted in laying off about 30% of the employees.  It was painful and risky, and one of the greatest business decisions ever.

Everything is coming up Roses

Fast forward about ten years to the mid-90s.  Intel is doing extremely well and on the way to becoming the most profitable and most valuable company in the world.  I am now a Corporate Officers (one of about 33), Vice President of Business Development.  Intel Capital, which I founded together with Les Vadasz was becoming a force in early stage technology investment.  I was leading Intel’s effort to establish residential broadband (cable and DSL).  I was doing everything I knew to do to get Intel to understand the Internet and the opportunities it could provide the company but this had little effect on the company’s strategy. 

Not invented here

In 1990, I had a chance to visit a young company called Qualcomm and meet with the CEO Irwin Jacobs.  Their company was primarily selling communications systems to the trucking industry but had developed digital communications systems called CDMA that they targeted for the growing mobile phone business.  Irwin explained the concept of spread spectrum to me and I was blown away.  I desperately wanted Intel to acquire Qualcomm but there was no way that was going to happen.  The idea was rejected without any real consideration.  The good news is that allowed me to buy stock in the IPO which turned out to be a good move personally. There were other companies like Broadcom that we could have purchased. 

So I started saying “Intel was in the memory business selling silicon by the ton.  One day, it found veins of gold called the PC.  Intel decided that it was better to mine gold than “coal”.  It put all its people and investments into the gold mining business.  Sometimes it looked for other veins of gold, but did not make too much of an effort because there was so much gold in this one vein.”  Then I would say, “do you know what you have when you extract all the gold from a vein? A big hole.”

Founder magic was gone…let’s play it safe

Towards the end of my Intel days, I realized that the company was not capable of making the kind of transition that Gordon and Andy did even thought this transition would have been much easier.  Andy gave up the reins as CEO to Craig Barrett. I left soon after in 1999.  Later, Paul Otellini  would become CEO.  Paul and I had been friends and I offered to help develop a strategy for the company as an unpaid and invisible advisor.  Intel had been very good to me and I felt that I owed the company this.  Paul never took me up on my advice except once when he asked me to look at the company’s mobile plans.  I did and told him I was underwhelmed.  I also put forward an alternative strategy that involved both mobile and server products that  could dramatically increase the security of mobile computing. 

Intel appoints a semiconductor manufacturing guy to lead the company

When Brian Krzanich was appointed CEO and my friend, Renee James was appointed President,  I once more offered my help including outlining a strategic initiative.  I sent it to them.   There was no reaction and I doubt that they read it.  Renee, who had the best chance of understanding the future, appears to have been pushed out and left the company at the end of last year.

Fire and spend

Now, Brian is taking action but is it the right action and is it too late.  More than 12,000 employees will lose their jobs. Brian brings in new blood but is offering compensation packages that are off the charts.  I don’t know Brian, and I have no idea what his plans for the company are other than what I read in the press.  The only thing I know for sure is that it did not have to be this way.  Intel had so many opportunities.

I remember something that Ken Olsen, the founder and former CEO of Digital Equipment Corp told me.  He said, “It is not what you do when things are bad that matters.  It is what you do when things are good.”  Of course, Ken did not take his own advice.

Maybe Intel needed Bill Campbell

Bill Campbell, affectionally known as ‘The Coach’ recently died.  They called him the coach because was once a football coach but more importantly because he coach many CEO’s in silicon valley.  I knew him well in the 90s both professionally and socially.  He was a remarkable man who had a major impact on Apple and Google and 100s of over companies.  A few months ago, a close mutual friend told me that Bill was dying.  I asked my friend to pass on my regards and to give him a hug for me.

This is what Bill told my friend “”What a great guy. When he left Intel, a lot of forward thinking disappeared. A really good man.”  That made me very proud. 

Intel’s future:  Get a bigger shovel

I started this post by saying that Intel was selling silicon by the ton when I joined.  They the found the PC was a vein of gold and the extracted all the gold that they could and found themselves in a big hole.  Now they are going to move away from the PC.  I wish them luck and want to offer one last piece of advice to Brian: Get a bigger shovel.