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Inside Intel
Tim Jackson
Originally published in 1997 and now available as an ebook. The first book on ‘the most profitable company on earth’, by the bestselling author of Virgin King.This edition does not include illustrations.Intel has been dubbed the most powerful chip company in the world and is now universally acknowledged as the only serious rival to Microsoft. Intel’s products are at the heart of the personal computers everyone uses at home and at work, yet the company has for many years been underestimated, to a large extent as a consequence of its secretive corporate culture.In this, the first book to be written about this company, Tim Jackson exposes a fascinating story of personal rivalry, powerful emotion, technological leadership, aggressive marketing, and spectacular failure and success. A company with as much paranoia as Apple, as much will to succeed as Microsoft, as much pig-headed arrogance as IBM, and led by some formidable characters who risked $1 billion and their entire trade reputation on concealing an error in the Pentium chip, provides the basis for a Barbarians at the Gate of a book by one of our leading authors.‘Has all the elements of a successful novel – power battles among industry titans, excessive wealth, ruthless management and even sex’ – Financial Times
COPYRIGHT (#ulink_0fd37194-d7bf-5bfe-a07b-0ce98ee7a5cf)
Fourth Estate
An imprint of HarperCollinsPublishers Ltd.
1 London Bridge Street
London SE1 9GF
www.harpercollins.co.uk (http://www.harpercollins.co.uk/)
First published in Great Britain by HarperCollinsPublishers 1997
Copyright © Tim Jackson 1997
Tim Jackson asserts the moral right to be identified as the author of this work
All rights reserved under International and Pan-American Copyright Conventions. By payment of the required fees, you have been granted the nonexclusive, nontransferable right to access and read the text of this ebook on-screen. No part of this text may be reproduced, transmitted, downloaded, decompiled, reverse-engineered, or stored in or introduced into any information storage and retrieval system, in any form or by any means, whether electronic or mechanical, now known or hereafter invented, without the express written permission of HarperCollins ebooks
HarperCollinsPublishers has made every reasonable effort to ensure that any picture content and written content in this ebook has been included or removed in accordance with the contractual and technological constraints in operation at the time of publication
Source ISBN: 9780006387977
Ebook Edition © DECEMBER 2016 ISBN: 9780008240615
Version: 2017-01-05
DEDICATION (#ulink_4c3f946a-b350-54dc-a2d3-8deec2cf0dc2)
To Emily Marbach
CONTENTS
COVER (#u7205c27e-d9e3-5906-97d3-b0fa8caa8e5f)
TITLE PAGE (#u570f0124-4983-514c-8f97-7e7f814c6570)
COPYRIGHT (#ulink_fc3b48e9-faea-5b3f-9698-7622afe7da7f)
DEDICATION (#ulink_92792912-3bbd-55f4-843e-b1dac55d03c6)
PROLOGUE: A Half-Billion-Dollar Mistake (#ulink_8b655786-90f2-51c3-b78b-7b6612b0d2b0)
PART ONE · INNOVATION (#ulink_296bc0dc-d89e-5c49-b829-ff1baaf7fbab)
1 The Odds-On Favourite (#ulink_ea2f86d0-0953-55f7-bc50-1b52ac31a87e)
2 2,000 Starts a Week (#ulink_b412df2e-27ab-50d0-83a7-7d6dce1db49b)
3 The Third and Fourth Men (#ulink_461a49ef-de4b-500f-94c3-df4ac9c4d49a)
4 Into the Potato Patch (#ulink_6bf4c9d6-9886-5f19-bf1f-4d0473245819)
5 A Saviour from Bucks County (#ulink_021981af-9b92-5842-bd0b-8c2fad48e9a0)
6 The Rebels
7 Yellow Snow
8 The Microprocessor
9 Public Company
10 Second Source
11 Turning Failure to Profit
12 A New Standard
PART TWO · DOMINATION
13 Borovoy Wins a Patent Battle
14 A Competitor on the Horizon
15 Penang Burning
16 Gopen Beats the Union
17 The Stop-Gap
18 Marriages and Divorces
19 Organization and Alpha Particles
20 The Microma Mistake
21 Crush!
22 Whetstone’s Design Win
PART THREE · EXCLUSION
23 Seeq and Destroy
24 Checkmate Powell
25 Microcode
26 Gold
27 The Vancouver Complaint
28 A Scandal in Malaysia
29 Davidian’s Bonus
30 The New CEO
31 An Anonymous Caller
32 Lagging the Koreans
33 Raising the Tax
34 The Two Webbs
35 Departures
36 A Question of Drafting
37 The Traitorous Two
38 A Hacker Inside
39 Tech Support Screws Up
40 The 10x Force
41 Winning the Platform Wars
KEEP READING (#ube528596-b2fd-5aa0-a014-9609e4c92f62)
NOTES
INDEX
ACKNOWLEDGEMENTS
ABOUT THE AUTHOR
OTHER BOOKS BY
ABOUT THE PUBLISHER
PROLOGUE (#ulink_c91d2ee1-1702-5b71-abf6-aae894c0c68d)
A Half-Billion-Dollar Mistake (#ulink_c91d2ee1-1702-5b71-abf6-aae894c0c68d)
ARTHUR ROCK WAS PROBABLY standing staring out of the floor-to-ceiling windows, gazing at the evening lights of the December city skyline, when the call came in.
His office suite, on the twelfth floor of a tall tower in San Francisco’s financial district, had a group of comfortable sofas at one end dominated by a collection of bold modern pictures. But Rock, who had suffered a bout of polio as a child, liked to take calls standing up. Next to his desk stood a light-coloured wooden reading lectern, which allowed him to work on his feet – like a clerk in a nineteenth-century government office.
It was hard, though, to imagine anyone further removed from the nineteenth century. Rock was a billionaire venture capitalist, who had made his money by investing in some of the most successful technology companies in history. He saw his job as doing more than simply picking winners and then sitting back to watch them get on with it. When Arthur Rock invested money in a company, he sat on its board of directors and helped to guide its strategy. In times of crisis, when his investments might be at risk, he’d be ready if needed to step in with firm advice on how the company should recover its correct course.
The incoming phone call gave no clue that today might be one of those occasions. As Rock’s secretary put the call through to his speakerphone, he heard the soft-spoken voice of Gordon Moore, chairman of Intel Corporation, opening the proceedings with his customary calm. Ever methodical, Moore would often start Intel’s board meetings by checking that all the participants had received the appropriate papers from Jean Jones, his trusted secretary for nearly thirty years.
Rock didn’t need to be told why the Intel directors were holding today’s board meeting by conference call instead of at the company’s headquarters in Santa Clara, just over an hour’s drive south of the city. Like the other Intel directors, he had read all about the crisis in the New York Times and the Wall Street Journal.
Intel’s heavily advertised flagship product, its new Pentium microprocessor, was flawed. The company had known about the flaw for some months and kept quiet about it, believing that only a tiny fraction of the millions of users of the chip across the world would ever be inconvenienced by the problem. But the flaw had been discovered by a mathematics professor, whose data had been posted on the Internet. Intel’s attempt to play down the issue had angered customers, worried investors, and ultimately provoked a storm of criticism in the media, culminating in a damaging report on CNN.
As the problem escalated, Intel’s response had been doggedly consistent. The company had kept repeating that the flaw was unimportant, and kept insisting that it required no corrective action from most owners of computers equipped with a Pentium chip. Intel had admitted that a small number of specialized users, mostly scientists or mathematicians, might need their Pentiums replaced. But Andy Grove, the company’s combative chief executive officer, insisted that the people best equipped to decide who was in this category were Intel’s own engineers. As a result, customers who wanted to return a flawed Pentium would have to call Intel and convince the company that they really needed a replacement.
Intel’s approach to the issue had the support of the computer industry. The last thing that makers and retailers of PCs wanted was to be put in a position where they had to open up hundreds of thousands or even millions of PCs already in the distribution channel on their way to end-users, and go through the time-consuming and expensive business of replacing their existing processors with new ones. So the industry, which understood from experience that no microprocessor was ever perfect on first launch, stood staunchly behind its leading chip manufacturer. Company after company issued press releases telling customers that the Pentium flaw was nothing to worry about, and Intel’s approach to the problem was just fine.
That wasn’t how the general public saw the issue. Inflamed by critical comments on the Internet, newspaper readers and TV viewers couldn’t understand why a maker of microprocessors should be any different from the rest of manufacturing industry. If you were in any other business and discovered a major problem with one of your products, you offered customers a free exchange, no questions asked. It was as simple as that. You didn’t screw them around by telling them the problem probably wouldn’t affect them and force them to call you and jump through hoops before they could get a replacement. Yet that was what Intel seemed to be doing – and its attitude seemed to be brazenly arrogant, since the problem with its new chip, advertised as the latest and greatest in computer technology, was a simple one: it couldn’t do long division properly.
For a few uneasy weeks the alliance of expert insiders had succeeded in defying the instincts of the less well-informed outsiders. It had looked as though Andy Grove’s boldness and willingness to take criticism and unpopularity would eventually triumph. The chorus of complaints against Intel had begun to die down, and consumers had seemed to be getting the message that the Pentium flaw wasn’t such a big deal after all.
But the situation was precarious. It depended on the giants of the computer business maintaining complete unanimity. If just one major vendor changed sides, then it would no longer be possible for Intel to convince its customers that all the experts agreed there was no problem.
That change had now happened. International Business Machines, the computer giant that had unwittingly helped Intel rise to dominance of the industry, had broken ranks. For reasons that Intel had not been able to fathom, the company had put out an announcement saying that it was putting shipments of new machines equipped with Pentium chips on hold until the issue was resolved.
The result was pandemonium as Intel’s customer-support lines were flooded with anxious callers. A new round of criticism was unleashed in the media. Finally, the company was forced to face one of the toughest decisions of its history. Should it guarantee to exchange all the flawed chips – even for customers who used their computers for nothing but playing games – and face up to wasting half a billion dollars on an unnecessary returns programme? Or should Intel stick to its guns? Should it save some money in the short term, but run the risk of throwing the computer industry into turmoil and causing long-term damage to the value of its brand?
This, Gordon Moore explained, was the question that Intel’s board now had to decide.
Maybe Arthur Rock should sit down after all.
The decision the Intel board took that day was undoubtedly the right one. Reversing completely its former position, the company announced that it would now offer a no-questions-asked exchange to anyone who owned a flawed Pentium. Andy Grove issued a grovelling public apology for the irritation that his previous stance had caused, and the company set up an emergency call centre to handle the expected rush of customers dialling in to take up the offer. To cover the costs of the incident, the company set aside $475m – more than half its earnings during the last quarter of 1994, when the board meeting took its decision – and turned one million of the world’s most advanced microprocessors into nothing more than ornamental tie-pins and key chains.
Once Intel had backed down, the bad publicity went away almost instantly. Within weeks, public confidence in the corrected Pentium chip began to return. Within months, the two class-action lawsuits that had been filed against the company as a result of the Pentium flaw began to move to settlement. And Intel, scarred and chastened by the experience, began to return to the business it knew best: building microprocessors for personal computers.
Today, three years later, the incident has been forgotten by most people other than specialists in the microprocessor industry. Intel’s brand is stronger than ever, and its share price has nearly quadrupled since that telephone board meeting. In retrospect, the Pentium incident now looks like an aberration, a buying opportunity, a hiccup in the otherwise irresistible rise of one of America’s most powerful and successful companies.
But was it an aberration? Or did the Pentium scandal reveal something important about Andy Grove and the company that he ran?
Intel Corporation, founded in 1968, can claim credit for inventing some of the most important technologies of the modern electronics industry and bringing them successfully to the mass market. Towering among its achievements is the invention of the microprocessor, which has brought the power of computing to the desks of hundreds of millions of people all over the world, and has changed the world around us by putting intelligence into appliances ranging from vacuum cleaners to cell phones and from toys to cars.
The conditions that gave rise to this extraordinary spike of scientific innovation were put in place by two men, Robert Noyce and Gordon Moore. Both of them were leading figures in California’s electronics industry, long before the San Francisco Bay Area even became known as Silicon Valley. It was their charisma, their leadership, their contacts and their reputation that brought together a group of the most talented engineers in the world and established the framework that allowed scientific creativity to flow.
But it was only for a short time that innovation was the most significant thing that Intel did. When it released the world’s first microprocessor to the market, Intel was just two years old, and had been a public company for only one month. It did not yet stand out far from the crowd of other startup companies trying to make money from the uncertain new technology of integrated electronics.
So Intel changed. From being just an innovator, it became a company whose objective was to deliver – to make sure its good ideas were turned into practical products that customers could use, products that arrived on schedule and at prices that fell consistently year by year. This transformation was no mean feat. It forced Intel to become rigorously organized and focused, and to find a balance that allowed it to keep firm control over its operations without jeopardizing the creativity of the scientists who were its greatest commercial asset.
