Two Thirds Done

Thoughts and experiences of an eighty one year old Wild Duck.

Avram Miller by the sea
EN | IT

587 posts since 2006

Tag: Intel

  • The Billions Invested in Nothing (The Story of BiiN)

    Steve McGeady, a friend and former colleague at Intel, posted a link to an YouTube video that covered the creating of BiiN a joint venture between Intel and Siemens.  I played a significant role in making BiiN happen.  It was one of many failures that I had in my career.   Watching the video and remembering that time, I thought I would write something about it.  Then I get a an idea.  I had already written a chapter in my book, The Flight of a Wild Duck, so I asked ChatGPT to create a blog post from that chapter which you can read below. 

    You can also read the full chapter here.

    Adapted from my memoir, The Flight of a Wild Duck.

    When I joined Intel in August 1984, I assumed I was joining a semiconductor company that understood where computing was going. What I found was a company that, for a while, wanted to be a minicomputer company. This is the story of the three years I spent on that detour, and what I learned from it.

    Arriving at Intel

    I came out to California without my family and spent my first few weeks at Intel’s site on Bowers Avenue in Santa Clara. Intel denied having a headquarters, but this sure came close. Gordon Moore and Andy Grove had offices there, and even Bob Noyce, then chairman of the board, still had one. It was a good place to meet the people who ran the company.

    I was going to be based in Hillsboro, Oregon, so my boss, Les Vadasz, and I decided I should attend the staff meetings of the Systems Group headquartered there and see if I could help. Much to my surprise, I discovered they were developing personal computers to sell as a “white label” product to companies that wanted their own branded PCs.

    My experience at Digital and then at Franklin made the cost side of this something I knew well. I quickly concluded the plan was a serious mistake. It would create friction with Intel’s own microprocessor customers, it was unlikely to succeed, and even if it did, it would not be very profitable. Through my industry contacts, I got pricing from other manufacturers willing to build private-label PCs. Their prices were lower than Intel’s cost to build the same machine. The project was terminated.

    The company that didn’t see the PC coming

    It is hard to believe today, but Intel did not anticipate the personal computer. By the mid-1970s, Gordon and Andy understood that the microprocessor would matter, and they pushed for a “mainframe on a chip.” But they believed the industry would go on being dominated by expensive, proprietary mainframes and minicomputers from companies like IBM and Digital Equipment.

    The first hobbyist personal computer, the Altair 8800, used an Intel 8080 in 1975. Still, Intel showed little interest when Atari asked about the 8080 for its home computers, so Atari chose the 6502 from MOS Technology. Steve Jobs had worked at Atari, and Apple followed it to the 6502. When the Apple II, the TRS-80, the Commodore PET and the Atari VCS all came out in 1977, none of them used an Intel chip.

    Meanwhile, Intel put its big bet on an ambitious new architecture, the 432, meant to incorporate the best academic ideas in computer design. Because it was risky, a simpler 16-bit chip, the 8086, was developed in parallel and released in 1978. Then came the critical decision to build an 8-bit-bus version, the 8088. IBM chose it for the PC because it fit the I/O design of the Datamaster, an IBM word processor whose motherboard the PC team wanted to reuse. The 432 did not ship until 1981, and it turned out to be too complicated for both the market and the semiconductor technology of the day.

    Lew Eggebrecht, the architect of the IBM PC, told me personally that Intel’s development systems, its compilers and debugging tools, were the most critical factor in his choice. That was the genius of Bill Davidow, who co-managed the microprocessor business with Les. He got Intel to understand that the product was not the device. It was everything that made the device successful: development systems, documentation, support and reference designs. That is how Intel beat Motorola with an inferior chip. Many credit Davidow’s famous Operation Crush campaign for the IBM win. I don’t believe it had anything to do with it.

    Had IBM not chosen the 8088, Intel would likely never have led in microprocessors. It probably would not exist today. Until the IBM PC took off, microprocessors were less than 10 percent of Intel’s revenue.

    Part of the problem was that Intel’s founders, Andy included, did not really understand computer architecture or even digital logic. They were process people, chemists and physicists. Memory chips, Intel’s main business until 1984, are far simpler than microprocessors and need no software. Management lacked the experience to judge a project as complex as the 432. The exception was Dave House, who came from computer systems and spoke out against it.

    Gemini: a minicomputer company after all

    Before the PC took off, Andy came to believe that half of Intel’s revenue should come from selling systems. The computer industry was still vertical, and IBM and Digital were very profitable. In 1980, Les was asked to figure out how to get there. Sudhir Bhagwan and Ed Slaughter proposed a family of multiprocessing, distributed, fault-tolerant computers to take on Digital and Tandem. The price tag was $100 million, far beyond what Intel could afford on $350 million in annual revenue. Andy told them to find a partner who would put up 90 percent of the cost for 50 percent ownership.

    That partner was Siemens. They needed a highly reliable computer for factory automation and nuclear plants, they had a struggling commercial computer business, and they had a lot of money. The agreement was signed in 1982, and the project was named Gemini, for the two companies. Siemens paid for the computer development and Intel for the chips, with Oregon as the main site.

    In 1983, two senior Intel executives, Casey Powell and Scott Gibson, walked out with fourteen others to start Sequent Computer Systems, a competitor with a simpler approach. Sequent later moved to Intel’s 386 and Unix, partnered with Oracle, and was bought by IBM in 1999 for $850 million.

    The heart of Gemini was a processor architected by Glen Myers that became the i960. It was the first microprocessor that could execute multiple instructions at once, a 33-bit machine. The extra bit tagged every word in memory as either ordinary data or a protected pointer to an object, and only privileged instructions could set it. A program could not forge a pointer or reach outside its own boundaries. Combined with redundant processors that checked each other, the system could detect and recover from its own failures. It was built for Ada, the language the Defense Department had commissioned. The architecture was elegant and incredibly overengineered. It made the 432 look simple, which was no easy feat. It needed four highly complex chips, a new operating system and compilers for several languages.

    When I looked closely, I found three engineering groups and not a single businessperson. I reluctantly concluded I had to take responsibility for the business side, at least for Intel. I had joined Intel hoping to take the company into the consumer market. This was the opposite. But I felt it was my duty, because I knew more about the computer industry than anyone else at my level.

    My reluctance was justified. Revolutionary products rarely succeed. I was once again on an overly ambitious project, like the Professional I had led at Digital, and this one was a lot less fun. I moved to Jones Farm in Hillsboro and stayed three years, isolated from mainstream Intel. I wondered whether I had made a significant mistake in taking the job and moving my family to Portland. Intel’s stock fell 40 percent in my first years, then crashed again on Black Monday in 1987, along with my dreams of paying for my children’s university. Fortunately, it recovered in time for my oldest son, Adin, to go to Brandeis University.

    We did find some good homes for the i960 as a component, in markets that needed high reliability: military, avionics and workstations. We even tried to get Steve Jobs to use it for NeXT. Boeing used it in the 777, its first fly-by-wire airplane.

    BiiN

    The original agreement left Intel and Siemens free to compete with each other using the same technology. I knew that without a change, our partner would soon become our competitor. So I proposed a joint-venture company. I spent the better part of a year negotiating it, flying to Germany every month to meet my Siemens counterpart, and we got the approval of both boards. Along the way I worked on the branding, and we named the company BiiN. It was announced in July 1988. By then I had already left the project for corporate business development in Santa Clara, the work that would ultimately lead to Intel Capital.

    Both companies wanted a well-known CEO. I don’t think I was ever considered, and I would not have taken the job. Thankfully, I was done with big computer systems. They hired Joe Kroger, who had been the number-two person at Unisys. Joe was a big-company guy and fundamentally a sales guy, and BiiN had nothing ready to sell. He was not dealt a good hand. Siemens had its own internal politics, including a competing effort with Sequent, and Intel was now totally focused on the PC. In 1989, both companies pulled the plug. Six years of work by hundreds of engineers were flushed.

    Inside Intel, people joked that BiiN stood for “Billions Invested in Nothing.”

    The joke exaggerated, but not by much. When the plug was pulled in October 1989, the trade press reported that the two partners had put about $250 million into the venture through that July, and that winding it down could cost up to another $100 million. Intel took a $35 million write-off for its share of the shutdown. Those figures cover only the joint venture. They leave out the years of chip development Intel paid for on its own under the original Gemini agreement, which never showed up as a separate number anywhere. All told, the two companies probably spent well over $300 million.

    Not quite nothing

    Still, the joke missed something. Intel never recouped its investment directly, but Gemini had brought in many talented computer scientists and engineers. After BiiN closed, Intel created the Intel Architecture Labs to give them a home, led by Ron Whittier. People like Kevin Kahn, Fred Pollack and Steven McGeady, who had come to Intel for Gemini, went on to play very important roles. IAL was essential to Intel’s evolution, and I would later work closely with it on residential broadband.

    The chip at the heart of Gemini also earned its keep. Freed from BiiN, the i960 became one of the best-selling embedded processors of the 1990s. From 1993 to 1995, Intel shipped more than five million a year, more than double any other RISC chip. Nearly half went into HP LaserJet printers, and about a third into networking equipment from companies like Cisco. By Intel’s standards it was never a big earner, a tiny fraction of what the Pentium made, but it stayed in production until 2007.

    For Les, the failure must have been incredibly painful. Gemini was his baby, started when everyone at the top believed Intel’s future was selling computers as well as chips. Les and Andy appreciated what I had done in putting BiiN together, and I had shown I could get things done. But I considered it three years of wasted effort.

    Looking back, I should have seen that launching a new proprietary computer architecture was impossible just as the PC was transforming the world of computing. Like so many others, including Intel’s top management, I was slow to grasp what was happening in front of us: the restructuring of the whole computer industry, from vertical to horizontal. The very technology Intel was making was the thing driving that change.

    As it happened, though, I now found myself in the right place at the right time. I moved to Silicon Valley and began the most significant period of my career, co founding Intel Capital and playing a major role in establishing broadband internet.

  • I Realize I Am Guilty of Self-Ageism

    I realize that I am guilty of ageism—and in particular, what I would call self-ageism. Ageism is a form of prejudice. It means thinking poorly of someone not because of their behavior or character, but simply because of their age.

    This realization came to me the other day while I was considering the possibility of joining the board of a company doing work I believe is very important. I said to myself, “You can’t join the board because you’re too old.” This wasn’t because I doubted my ability to contribute, but because of how I thought others would perceive me.

    Chronological age is not the same as biological age. Chronological age is useful in understanding the kinds of experiences a person may have had. For instance, I can remember when televisions were circular, the images were in black and white, and there were only three channels. But this says nothing about my biological age.

    Biological age is complex. It’s an estimate of how you compare to others, physiologically. It’s often thought to follow a bell curve around chronological age, but I don’t believe that’s accurate anymore. Advances in healthcare have extended both health-span and life-span. Importantly, different parts of our bodies age at different rates, making it hard to define anyone by a single number. For a board member, cognitive function is far more important than the ability to lift weights.

    Yet the world still runs on chronological age. For example, I can’t get a mortgage in Italy, where I now live, because of my age. No test of ability will change that. It’s understandable that things like life insurance or driver’s licenses must rely on averages, but I don’t think that should apply to things like board positions.

    Intel, where I served as a corporate officer, had a policy that management board members had to retire at 65, and corporate officers could not be older than that. That included people like Gordon Moore, Andy Grove, and Les Vadasz. Outside independent directors could not be older than 72. This meant losing those with the greatest experience and wisdom. It didn’t seem to work out so well for Intel.

    I believe I still have much to offer. I shouldn’t let my perception of how others might view me affect how I view myself. While ageism is real, I at least have control over how one person sees me—me!

  • Intel recently announced it is spinning out Intel Capital.

    Les Vadasz and I co-founded Intel Capital in 1991. Les had hired me in 1984, and he was the only person I reported to during my 15 years at Intel. He was among the original 12 people who started Intel, appearing as employee #3. Sadly, he is the only one of that group who is still alive. Les and I met a few weeks ago when I was in California visiting friends and family. He was my mentor, partner, and remains my friend.

    Initially, Intel Capital was named Corporate Business Development (CBD). It wasn’t renamed to Intel Capital until after I left in 1999. In fact, I started the precursor to CBD in 1988, reporting to Les. I had a small group focused on minority investments and M&A. At the time, my focus was more on M&A, as I wanted to expand Intel’s business into areas like communications, networking, and graphics.

    After several attempts to acquire networking companies—Cisco was deemed too expensive, and 3Com was “too screwed up,” according to Andy Grove—I came to the conclusion that we couldn’t afford the companies we liked, and we didn’t like the ones we could afford. Watching what happened to the few companies we did acquire also taught me a valuable lesson: Intel’s culture was so strong and insular that it would reject acquisitions like “antibodies attacking a foreign object.” This led me to shift the focus toward early-stage companies.

    By 1991, both Andy Grove (then CEO) and Les concluded there was significant benefit in taking minority investments, not just in early-stage companies but also in more mature ones. Andy asked Les to take overall responsibility for these activities (Les was one of the most senior executives at Intel) and probably added something like, “And keep Avram under control.”

    Les and I worked together to define the role of CBD/Intel Capital. We settled on three major objectives:

    1. Investments that would grow Intel’s current business: A great example was my leadership in developing residential broadband, which played a major role in driving the home computer market for PCs.

    2. Gaining strategic insights to guide Intel’s future business plans: Unfortunately, we had limited success here—not because we didn’t gain insights, but because we couldn’t exert enough influence within Intel to act on them.

    3. Achieving reasonable financial returns: We knew we had to be profitable quickly, or Intel’s “bean counters” would make our lives miserable. On this front, we exceeded all expectations. We made buckets of money. By the time I left, Intel Capital had $9 billion in assets (mostly from gains) and had already taken about $3 billion off the table.

    We didn’t operate like a traditional venture capital group. No one had carry-interest. Compensation was the same as for the best of Intel’s employees: salary, bonuses, and stock options. Les and I were well-compensated, though we could have made more as partners in a VC firm. However, making money wasn’t our primary driver; we believed deeply in Intel. Those who worked for us didn’t fare as well financially, as they didn’t benefit as much from stock options. Still, many learned the trade and eventually moved on, which we were okay with. Recruiting and training excellent people from within Intel was a core part of what we did.

    Over time, Les expanded his team, and I expanded mine. My efforts were recognized when I was named one of Intel’s 33 corporate officers, a milestone I achieved thanks to Les and Andy’s support.

    After Les retired in 2003, Arvind Sodhani, Intel’s former Treasurer, took over Intel Capital. From what I understand, Arvind focused more on returns on investment than on the broader strategic impact of the group. However, I can’t say for sure—I wasn’t there.

    I firmly believe corporate venture capital is a strategic function and shouldn’t be driven primarily by financial returns.

    Intel is going through tough times now, and it’s unclear if the company can survive. This is the result of a series of bad decisions, particularly in the selection of CEOs, starting with Craig Barrett in my opinion. Intel’s board has been one of the worst I’ve ever observed, and this decline started when Andy Grove became chairman.

    Spinning out Intel Capital is likely the right decision given Intel’s current situation. Nevertheless, it makes me sad.

  • Intel Must be Saved

    I write often about Intel and in particular is spectacular rise and fall.  I have explained that Intel under the leadership of Andy Grove, recognized  the opportunity of the Personal  Computer and brilliantly exploited it.  That as act two for Intel which had originally focused on memory devices. The PC opportunity in which Intel played not initial role in its creation came along just in time to save the company for bankruptcy or a sale to the Japanese (Grove once confided in me that this was something he saw as a possibility).  But Intel missed act three, mobile computing which created the opportunity for TSMC (Taiwan Semiconductor Manufacturing) to become the leading manufacture of semiconductors and to over take Intel in terms of technology in starting in 2017 and asserting a clear leadership position by 2020.

    Intel was/is a vertically integrated semiconductor company meaning that it both designs and manufacture its chips.  Companies like Apple and Nvidia (and many more), design chips but then utilize TSCM to manufacture them.  Apple made the decision to move the manufacturing of the processor for the iPhone to TSCM in 2014.  Steve Jobs, the CEO of Apple, approached Paul Otellini  the then CEO of Intel in 2005 about providing the processor for the yet to be designed iPhone.  Otellini famously turned Jobs down because he did not see the potential of the smart phone and was not interested in having a low margin business while Intel factories were operating at full capacity. Apple turned to Samsung.  The iPhone was introduced in 2007. In 2014, Apple moved to TMSC. Apple is TMSC largest customer, accounting for 20-25% of sales, followed by Nvidia and AMD.   Companies like Amazon, Google and Microsoft design their own chips and then have them made by founders like TSMC.   They probably represent about 20% of the semi conductor demand.  The equipment used by TSMC and other foundries is made by a number of companies with the leader being the Dutch company, ASML which has about 25% of the world market.

    When I joined Intel in 1984, the company was vertically integrated. It developed its own manufacturing capabilities and designed it own chips.  In 2000 for instance, half of Intel’s engineers were involved in manufacturing technology. The manufacturing technology group was called TMG.  It was initially led by Craig Barrett who become Intel’s COO in 1990 and succeeding Andy Grove as CEO in 1998.  He became board chair in 2005.

    It was Barretts appointment to CEO the cemented my decision to leave Intel which I did in April of 1999.  Intel was very insular during my time there (1984-1999).  Of the 33 Corp officers listed in the 1998 Annual Report, I was the last to have joined, 14 years earlier.   Andy, and I often spared about strategy.  I regretted my inability to have much impact on his thinking.  All of this is covered in my book, The Flight of a Wild Duck.  

    During my last years at Intel, I often had debates with Andy about the future of the PC industry.  At that time, I was leading Intel’s efforts to create residential broadband as well leading the consumer investments of Intel Capital.  Andy, realized that Intel needed to expand the companies business into other areas because the PC but was incapable of making that happen.  He thought that Barrett would be the one to do that but alas that was not the case. I use to say that Andy wanted the same old ideas from the same old people and the Barrett wanted new ideas from the same old people.  The was very clear when he took Gerry Parker the then leader of TMG and made him head of new business development even though Gerry never ran a business in his life.  The result of billions of dollars wasted in new business development and a reduction in leadership of TMG which proved deadly.  By the way, I offer Gerry my help in his new role but he declined.

    It is amazing to me that Grove who wrote a brilliant book, “Only the Paranoid Survey” in which he explained how the computer industry went from vertical integration with companies like IBM and Digital Equipment where companies had proprietary hardware and software as well as there own peripherals and service organization, to the PC world where different companies produced the hardware, peripherals, software and services.  What happened to Intel was describe  by Clayton Christensen in 1997 in his very impactful book, The Innovators Dilemma. Andy was well aware of the concept as we had Christensen teach a class to the executives and advise the company. This book explains a great deal about what happened to Intel and so many other companies.  It is hard for successful companies to reinvent themselves.  They cling to their success protecting business that generate high profits.  Talent manager seek to run the successful businesses rather than take risk to run new ventures.  And those that want the new ventures often leave to start their own successful business.  

    The story of Intel would just be another example if it was not for the strategic importance of having USA domestic leader in chip development.

    During my time at Intel. the PC boom drove Intel’s volume.  While the X86 architecture was not ideal, intel’s ability to push performance by outstanding semiconductor process development, allow the company to monopolize the PC industry.  

    What went wrong

    I blame Intel’s board, When I first joined Intel in 1984, the company had an amazing board. but it was a board that change under Grove’s chairmanship.  It became focused on governance and financial issues. Few on the board understood the semiconductor business and the importance of investing in the process technology.  After Andy’s chairmanship (1997-2005), Barrett become the chairman (2005-2009).  You would have thought he knew better but he did not actually have a good relationship with the other board members. He was succeeded by Jane Shaw (2009-2012) a health care executive, then Andy Bryant (2012-2020) the former CFO of Intel.  Bryant is in my opinion bares the most responsibly for the decline of Intel.   After Bryant (came Omar Ishrak (2020-2023) of Medtronic, another health care executive and finally Frank Yeary (2023-Present)  and investment banker.  

    Stock Buybacks

    One of the unforgivable acts of the board was supporting stock buybacks.  Intel used $108 billion dollars to by back its own shares as an average price of $45 dollars.   This is more than the company is currently worth.  Part of the downward  pressure on the stock results from concerns that the company does not have enough capital to pull of it strategy having a major boundary business.  

    After Grove left as CEO, their was a succession of CEOs, each worse than the previous.  One of the major responsibilities if not the main responsibility of a board is to appoint the right CEO.  Intel’s board failed spectacularly in this regard.

    . 1. Craig Barrett (1998–2005)

    2. Paul Otellini (2005–2013)

    3. Brian Krzanich (2013–2018)

    4. Robert Swan (2019–2021)

    Then there was Pat Gelsinger (2001-2004)

    Pat first joined Intel at the age of 18 in 1979.  I meet him soon after I joined Intel in 1984.  I remember being impressed by his energy.  He became one of Grove’s “fair hair boys”.  Since I was not really that involve with the microprocessor development, I did not have much to do with Pat until Pat was appointed by Andy to lead the failed video conferencing product,  Pro Share project. It was a poorly conceived but it was one of Andy’s failed to create to create new applications for PC market. Andy tapped Pat to run that project although Pat had no qualifications.  At that time, I was driving Intel initiative to create residential broadband.  I knew a great deal about communications and new that ISDN and working with the phone companies would led to a disaster but neither Pat nor Andy would listen.  Pat left Intel in 2009 to join EMC Corp as President and COO.  I believe that Pat was push out by Otellini, the CEO.  I was no longer at Intel and have no direct knowledge other than hearsay.  

    In many ways, Pat was a great choice to try to retrieve Intel.  But right away, I began having concerns.  One of Pat’s first pronouncements about his joining was to say “Intel is back.”  He kind of had a messianic tone to his speeches.  He like to liken himself and his return to Steve Jobs.  But Gelsinger was no Steve Job.

    Never the less, I think he did have a strategy for the company.  Pat recognized that need for there to be a foundry based in the USA to compete with TSMC especially given the geo political issues between Taiwan and China.  But building a boundary business is very capital intensive.  Intel would have to match or exceed the abilities to TSMC.  That would take years and billions of dollars. There problem is that Intel is a public company and investor in such companies are very short term oriented. 

    On Dec 2nd, Gelsinger abruptly resigned.  It is not really clear what happened.  Clearly there was a major disagreement about direction at the board meeting.  Over time, we are likely to learn more.  

    What will happen now

    I think there are a few scenarios.  The best would be for Intel to be taken private, perhaps by a consortium led by Michael Dell (Dell Computer) which would bring Pat back to lead this effort. 

    Otherwise, I think Intel will be sliced and diced and cease to exist as an independent company.   I hope that does not happen.  The USA and the world needs a vibrant Intel.  Intel is the only USA company that can build a capability similar to TSMC.  

  • Intel, Qualcomm, and Me

    In early 1991, I first met with Qualcomm.CMDA technology. Irwin Jacob (CEO) and his co-founder, Andy Viterbi , attended the meeting. Paul Jacob, the son of Irwin, who later became CEO in 2005, was there as well. I was introduced to them via General Instruments. Their main business then was Omnitracs system, a satellite-based communication and tracking system designed for the transportation industry. However, they were far along in developing CDMA technology.

    At this time, cell phones used analog technology.  Both GSM and CMDA were under development. I think they were introduced commercially around 1995.  I knew nothing about cell phone technology but was pleased to get a comprehensive tutorial. I was fascinated by the technology.  I did not know about the role of the actress Hedy Lamarr* in the development of spread spectrum technology, which was the core technology used by CMDA. Qualcomm had also acquired Eudora, an email client, and Paul was running that part of the business for reasons I no longer understand. 

    The potential of CDMA blew me away. I realized it could be used to support packet networks.  I was beginning to understand the potential of the cell phone to become a computer, but frankly, it took me until 1999 to truly embrace that idea. This was a bit before the formation of Intel Capital by Les Vadasz and me.  I was reporting to Les as VP of business development and was primarily focused on acquiring network technologies for Intel. However, when I started to explore acquiring or investing in Qualcomm, it was clear from the reaction of various executives that Intel had no interest in mobile technologies. At that time, the focus was still on the desktop not even notebook computers.

    The good news for me was that since we had no interest in Qualcomm, I was cleared to invest in the company directly, and I bought shares in the IPO.  I wish I still had them.  The company was valued at about $210 million at the IPO. Now, it is worth $188 billion. 

    Later, perhaps around 2010, I proposed to some of the Intel board members with whom I was still in contact to explore merging with Qualcomm and making Paul Jacobs, its CEO, the CEO of the combined company.  That and all the other advice I offered to the board after I left Intel was ignored.  Now, Qualcomm is exploring acquiring Intel. Frankly, I don’t think it makes a lot of sense. It would be tough to digest.  

    By 1992, I realized that Intel was not capable of acquiring anything meaningful when I first proposed acquiring Cisco, and Andy Grove said the company was too expensive when I looked at that in 1990) and then 3COM, which was too crappy.  I said, “I get it.  We can’t afford anything we like and don’t like anything we can afford.”  More importantly, Intel’s immune system would have attacked the foreign body and destroyed it.  That drove me to look at early-stage investment instead of acquisitions. Intel would have destroyed Qualcomm if it had acquired it. Now Qualcomm may acquire Intel.

    *Hedy Lamarr played a significant role in developing technology that would eventually contribute to modern wireless communications. Alongside composer George Antheil, she co-invented an early version of frequency hopping spread spectrum technology during World War II. This technology was initially designed to prevent the jamming of radio-controlled torpedoes. Though not implemented in wartime, the principles of their invention have been incorporated into modern technologies, including CDMA and Wi-Fi, demonstrating a foundational contribution to secure wireless communication methods.

  • Is Nvidia the Next Intel

    Nvidia, the wonder child of the tech world just announced a $50 billion stock buy back.

    Stock buybacks are when a company uses it cash to purchase its own shares. There are a number of reasons for doing this. But it starts off with the company having an excess of cash and coming to the conclusion that the do not need this cash to continue to grow. Returning the cash in the form of a stock buy back reduced the number of total shares which has the effect of increasing the price/earnings ratio. So the stock price is expect to go up. That is often happens in the short term and is a benefit to both stock holders and employee option holders. The company has to also believe that their stock is either fairly valued or undervalued for the buyback to make sense. Frankly, I have a hard time thinking the Nvidia’s stock is undervalued. This action by Nvidia makes me think about my former company, Intel.

    Lets look at what happened at Intel.

    Total Buyback Summary (2018 – Q1 2023)

    • Total Shares Purchased: 756.3 million shares

    • Total Amount Spent: $35.534 billion

    • Overall Average Share Price: $46.97

    Breakdown:

    • 2018: $8.9 billion over four quarters, with an average price of $47.81.

    • 2019: $13.6 billion over four quarters, with an average price around $50.39.

    • 2020: $14.2 billion spent over three active quarters, with an price around $50.88.

    • 2023 $2.415 billion spent with an average share price around $61.15.

    Please note that Intel’s current stock price is about $20. So the stock they bought lost more than half of its value.

    Is Nvidia buying back its own stock a smart decision? Personally, I think not. They would be better of diversifying and buy other companies or assets and using their stock and not their cash to do it.

  • How Intel mistakes being lucky for being smart

    I always say that two things make for success: being lucky and not mistaking luck for being smart. Luck is the most impactful factor contributing to success. It is generally not sufficient, but it is usually the most important. This is a crucial lesson for all business professionals, as mistaking luck for being smart can lead to disastrous consequences.

    So, how does this relate to Intel’s dramatic decline? The IBM personal computer brought the luck that fueled Intel’s remarkable growth. Intel had no influence over IBM’s decision. IBM chose the 8088 microprocessor due to time-to-market considerations. To supply IBM, Microsoft bought an operating system that ran on that microprocessor, which became PC DOS. This stroke of luck became the foundation of the Personal Computer. Once Intel realized the opportunity (several years after the IBM announcement in 1981), Andy Grove got the whole company focused on it. As I am fond of saying, Intel discovered a vein of gold and extracted every ounce, leaving it eventually in a big hole.

    The result was a substantial increase in its market cap. However, the company mistakenly believed that the PC phenomenon would continue indefinitely. Andy Grove and I had many arguments about this, and I, for one, made several attempts to expand the company into other areas, particularly networking and communications, but my efforts failed. My suggestion to acquire Qualcomm was dismissed because ‘why would we want to be involved with cell phones?’ Broadcom was the most logical company for us to develop, but we didn’t do that either. Intel just doubled down on the PC.

    We should’ve turned our overvalued stock into a currency to acquire many other companies. At the same time, Intel Capital, which Les Vadasz and I founded in 1992, became the most successful corporate venture group of its time. Les and I wanted to have a significant strategic impact on the company through the insight that we gather from working with with early stage companies, but we did not. We did help grow the PC business and made a lot of profit but it had no long-term influence on Intel’s direction.

    Just before the so-called dot-com bubble burst, Intel had a market cap close to $500 billion, resulting from Intel’s growth and astounding profits and a stock market that went crazy for the internet. How Intel could think this would continue is beyond me.

    After leaving Intel in 1999, I was on the board of several internet companies. One, PCCW, under the leadership of Richard Li, also had a ridiculous market cap. But we knew it and used our stock to buy a real asset, the Hong Kong phone company.

    After the PC, Intel never got lucky again. But luck was there. Luck would have been buying Nvidia, which had a market cap of about 6 billion. We considered it many years earlier because we needed to improve in graphics. But our concept was to make the microprocessor do everything to justify our high prices. However, the micro process could not do everything. The luck would have been buying a graphics company focused on gaming that would turn out to be the engine for AI.

    Intel managed to miss every significant new opportunity after the PC, 43 years ago.

    Now, I am sad to say, its days are numbered. I think it would eventually be broken into pieces and sold off. It reminds me of Digital Equipment Corp which suffered from the same, disease, hubris.

    You can read more about this in my book, The Flight of a Wild Duck. https://wildduckflight.com/

  • Intel is dying 

    I have been part of two significant technology companies that were leaders in their fields at one time, the time:  Digital Equipment Corp and Intel.  I was a Digital from 1979-1983 and Intel from 1984-1999.

    Both companies, founded by outstanding entrepreneurs, left an indelible mark on the computer industry. Their strong cultures, while a source of strength, also became a barrier to adapting to the changing technology and markets.  Digital, in its 41-year existence from 1957 to 1998, and Intel, still standing after 56 years since 1968, failed to adapt to a changing environment.

    Each company was led by a charismatic CEO who refused to accept the future.  I left both companies at their peak because of that and my inability to impact those companies’ strategies.  

    Both companies replaced the founder CEO with incompetent leaders. In the case of Digital, Robert Palmer took over from Ken Olsen in 1992.  Seven years later, the company was sold to Compaq Computer.  Andy Grove, the CEO who failed to understand the impact of the Internet and continued to double down on the Personal Computer business, brought in his replacement, Craig Barrett, who had even less understanding of the future than Andy. This led to a series of ever-worse CEOs until we ended up with Pat Gellinger.  Pat who saw himself as the savior of Intel, will not save it. He is likely to be the last CEO of Intel.  I suspect the company will end up being broken into pieces and sold off.   By the time Pat became CEO in 2021, it was too late.  The decisions that Pat made since taking the helm only made things worse.  

    As I have often written, the job of the Board of Directors is to make sure a company has the right leader.  The boards of Digital and Intel failed spectacularly in this duty.

    I feel bad for all those who worked at Intel and those who still work there. Like those who worked at Digitial, they love their company. Sadly, those at Intel are going through a very difficult time, which will not have a happy ending.

    I have written much about these two companies in my book, The Flight of a Wild Duck.

  • Living my life in reverse

    My professional journey is unfolding in a way that might seem like living life in reverse. I started in medical science and weaved through technology before circling back to healthcare, moving from the USA to the Netherlands, then Israel, back to the USA, then Israel, and now the Netherlands. I went from English to Dutch and Hebrew(struggling) and then back to English, Hebrew (still struggling), and now Dutch.

    I embarked on this path at 22 at the Medical University of California, San Francisco. Here, I pioneered technology in neurophysiology utilized in the biofeedback of brain waves, focusing on real-time physiological signal processing—a niche that, at the time, had me as its sole expert.

    Later, I  applied technology to problems in diagnosing and treating cardiovascular and pulmonary disease at the Medical School of Erasmus University, Rotterdam, and then the Medical School of Tel Aviv University. During this period, I went from being a research assistant and technician to becoming an associate professor. I also established a business in Israel which commercialized my academic work.

    I loved learning and practicing science, but my love of technology animated me the most. My initial career in medical science took me from San Francisco to the Netherlands and then to Israel.  It was an incredible 13-year journey. How could I have known then that I would return to medical science?

    In 1978, I made a profound decision to leave the field of medicine. It was a difficult decision.  After all, I had achieved unlikely success from being a merchant seaman sailing on ships in Asia at 18 to an Associate Professor of Medicine by 29. I could not help myself.  I wanted to be part of the computer industry and play a role in shaping its development.  Digital Equipment Corporation offered me a position as the Small Computer Hardware Development Manager in its Central Engineering Organization, and a year later, I was promoted to Group Manager responsible for the Professional Computer Group.  Now, I was back in the USA (Boston Area). 

    In 1984, I joined Intel Corporation, eventually becoming one of a few Corporate Officers and serving as Vice President of Corporate Development. In 1992, Les Vadasz and I established Intel Capital, one of the world’s most successful corporate venture groups. 

    I left Intel in 1999 to work for my own account, providing strategic advice to public and private companies and serving on several companies’ boards.  In 2017, my wife and I moved to Israel, where we lived until recently.  Then, about ten years ago, I decided to focus my efforts again on the intersection of medicine and technology.  I made several early-stage investments in this area.  My initial focus was on sleep health.  I was one of the first investors in Oura Ring and pulled together much of its initial financing. I became a Senior Advisor to the Cleveland Clinics Research Institute and then worked with Sheba  Hospital in Israel to set up a Longevity Center.  This led me to explore personalized/precision medicine.  I started to learn about AI. It reminded me of fifty years earlier when I held a single transistor in my hand, discovered the concept of software, and learned to program. 

    Then, I was granted an opportunity to participate in using AI in health care when I joined the board of Renovaro, which was in the process of acquiring an AI-based cancer diagnostic company (GEDi Cube). I joined Renovaro’s board and moved back to the Netherlands to work closely with the team at what is now called Renovaro AI in Amsterdam. We have moved to Amsterdam, and I go to the company’s offices several times a week.  I am also enjoying speaking Dutch once again.  At 79, I figure I have at least one more act ahead.

    Much of what is written here can be read in more detail on in my book, The Flight of a Wild Duck.

  • Intel’s dominance of the PC Microprocessor business

    I have written about my concept for understanding businesses, which I call Oyster for Opportunity, Strategy, Execution, and Reward.  

    Recently, I have been discussing with someone from a company I advise. I was asked to see if I had any materials from the past, for instance, from my time at Intel, that dealt with strategy. Sadly, I do not. I did not keep any of the materials I had from Intel when I left. I honored my confidentiality agreement. But the request made me think back on the strategy that Intel brilliantly executed to be one of the dominant players in the PC business during the 90s, and I thought I would relate that here.

    I joined Intel in 1984, and while I was not directly initially involved in the PC business, I was senior enough in the company’s management. I participated in the overall strategy discussions of the company.  

    Intel was slow to recognize that the development of the PC business that resulted from the launch of the IBM PC in 1981 would transform the computer industry. Personal computing had not even made the list of the top applications for the 386 processor. But that changed as the sales of personal computers climbed. In my book, The Flight of a Wild Duck, I give Compaq Computer credit for that. Later, as Vice President of Business Development and especially after co-founding Intel Capital, I got very involved with the personal computer market.

    Opportunity: Become the dominant supplier of microprocessors for the PC industry

    Intel eventually recognized the opportunity to become the dominant supplier of microprocessors to the emerging PC market. Before that, Intel sold microprocessors into various markets, like military, telecommunications, etc. The market microprocessors were not used in general computing, with few exceptions like terminal devices. Andy Grove, the CEO, came to recognize the strategic opportunity that the PC presented. I was fortunate to witness his growing awareness.  

    To take advantage of an opportunity, you must first recognize and embrace it. Then, you must develop a strategy that you must execute almost flawlessly. That is what Intel did.

    Strategy for dominating

    Become the sole source provider of high-end microprocessors for the PC market.

    Semiconductor Companies had little market power. Vendors were unwilling to have sole source parts, so they required companies to license their products to other manufacturers. For instance, Intel licensed AMD, thus creating their competitor. Not only did second and third-source suppliers give additional confidence to customs, but it kept the prices down. Intel had to stop this practice. They were only in a position to do this because the dominant operating system, PC DOS from Microsoft, only ran on Intel and compatible processors. Microsoft had little incentive to spend money porting their OS to a different architecture. IBM eventually tried to make an end run but failed (another very long story).  

    Move customers to 32 bits

    Intel had to get customers to move to 32-bit processors as it had widely licensed the 286 to other companies, including IBM. IBM also had a license for the 386, but they gave this up in return for Intel agreeing that they could manufacture more 286s for their own use. Although iIntel was the dominant supplier of the 16-bit 286 processor, they ran an advertising campaign against it. IBM, the leading supplier of PCs, would not move to the 386 because they were concerned that the additional processing power would allow PCs to compete with their other and more costly computers. So Intel provided Compaq Computer with incentives.

    Get control of the brand

    Intel processors had numbers as their brand, such as 286, 386, and 486. The court had ruled that these numbers could not be copyrighted. So, Intel developed a brand name they could control, Pentium. 

    Take over the R&D for PC development.

    PC manufacturers each had a lot of competitors and little product engineering capabilities. In order to keep the PC’s increasing capabilities, Intel set up the Intel Architecture Labs and did the engineering for the industry. They would provide reference designs, which created even more PC manufacturers, especially Asian manufacturers. More and more of the value of the PC became associated with Intel and Microsoft.  

    Push consumers to want high performance.

    Intel used its relationship with software companies and the Intel Architecture Labs to develop capabilities that required higher-performance processors. An excellent example of that was multi-media.

    Create an ingredient brand, Intel Inside

    intel decided to become an ingredient brand (kind of like Dolby or NutraSweet) and launched the Intel Inside program. Intel provided marketing dollars to PC companies that used this program, which, in effect, lowered their price and made it not competitive to offer PCs without the Intel Inside logo.  

    Utilize massive volume to support the most advanced manufacturing

    The intel architecture had a lot of baggage. Newer processes using RISC architecture could improve performance for the same transistors. However, Intel’s advanced manufacturing allowed Intel to be a generation ahead.  

    What went wrong

    Two things impacted Intel’s ability to continue with these strategies. The first was the internet, which pushed much of the computing to the cloud. The second was the advent of smartphones and other non-pc devices. People wanted the freedom of mobile computing. In a tremendous strategic error past on having a vital role in the smartphone market, Intel turned down Apple’s request that they manufacture the chips for its phone. Eventually, Intel failed to stay ahead in semiconductor manufacturing.