An Open Letter to Intel CEO Paul Otellini

Mark R Anderson — Tue, 25 Mar 2008 08:11:40 -0700

To: Paul Otellini, CEO, Intel

From: Mark Anderson, CEO, Strategic News Service

Dear Paul,

As the first non-engineering guy to run Intel, I know the spotlight has been just a little brighter on you (internally) than it might have been for someone else. And I won't say I envy this scrutiny, or the job behind it, which has seemed to become much tougher lately.

Most real outsiders probably think you have a cakewalk here: Running an essential monopoly, defending the realm, working with one of the world's top brands -- how hard can it be? Of course, you're facing just the opposite: Every new day is full of tigers and pitfalls, as many internal as await outside.

As you know, I was among the first to pick you for CEO at Intel, awarding you a "Brass Ring" award years before you became COO. At the time, it looked like you had turned lemons into lemonade by switching the marketing from ever-increasing horsepower numbers for microprocessors to branding and marketing whole chipsets (the "Centrino"). This let Intel lock in extra chips per sale, further locking out competitors from being able to match the offering, and taking the heat off (pun intended) the engineers while you were being told that heat would limit how fast new clock speeds could grow. (See "The Next Intel").

But that was then.

AMD came along, shipping the first 64-bit chips (wow, that never should have happened!), putting caching more intimately into the microprocessor design, and generally beating you on the engineering side. Then, to add insult to injury, they released the first true multicore microprocessors.

For awhile, their chips were better on all metrics: Power use, pricing, speed, technology. Where, exactly, was Intel during that year or two? Did the whole company take a yearlong cruise studying the value of medicinal marijuana?

For me, this situation underlined the risk of putting an MBA in charge, vs. an engineer; it was exactly the kind of scenario one would predict. To your credit, the company has since come around in typical Intel fashion, and you've replied to each of these technical challenges with stronger products (who, other than the FCC, says competition isn't good?).

So, while I think you've done a good job of recovering in your core market, there are some other issues that are worrying.

First is Intel's culture. It is one of those key CEO issues that are almost never addressed, but which are the greatest contributors to successful company outcomes. As Bill Gates proved so well in the past: There is paranoid, and then there is Illegal Paranoid -- the attitude that gets you into court. And, as George Hubman, co-founder of WRQ, once told me, "There is no such thing as corporate culture. All there is, is the personality of the CEO."

Intel's job, your job, is to out-compete others in your business. While doing this can make you a winner, how you do it can make you a loser at the same time. In the last few years, Intel has faced (or is still facing) antitrust charges brought by the EU, New York State, Japan, South Korea, and AMD. The Japanese have raided your offices in Tokyo, the EU has raided your offices in Munich, and it looks like the EU may be preparing additional complaints.

Do you not hear the outside world talking to you? It seems so, and if so, this is a terrible mistake. They are not saying, "Hey Paul, nice going, you're really being a competitive guy. This is just 'business as usual.'" They are saying, "we think Intel is breaking the law. Stop it!" When a whole series of nations say this to you, this isn't just your competitors causing trouble; it means you are out of control, out of bounds, over your head.

When Intel joined the board of the One Laptop Per Child non-profit, and then announced its own competing product (one that also competes with its own customers), and then seemingly walked around the world sabotaging OLPC's order book -- well, that wasn't necessary, was it? That kind of competitive behavior verges on the anti-competitive. Of course you have the right to make computers, but do you need to act badly to win? Do you really have to kill off the other guy?

There is a difference, in business, between leaving a few pennies on the table when the deal is done, or not; between competing with a company, or destroying it. In addition to any legal questions involved, in my experience it will cost you billions more in ill will if you choose the latter path. This has nothing to do with being paranoid: It has everything to do with good business, smart management, and long-term market planning.

As Cisco CEO John Chambers could tell you, you live in an ecosystem, where competitors one day are often resellers -- or even new divisions -- the next day.

And here is the worst part of crossing that line between being a tough competitor and just being out of control. Are your employees happy? Are your customers?

Personally, I don't think they are. Clearly, the huge headcount cuts during the processor market share loss didn't help; but it's at times like these that culture matters most. I asked one longtime employee with a husband also at Intel what the mood was internally, and she said they were both job hunting. I've talked with top people at Intel who were apologetic about the company's behavior.

You've found various quasi-legal (i.e., still under legal review) ways to lock in customers, and perhaps freeze out competitors, but the carrot is always better than the stick. As you know, sticks tend to be illegal, and they create serious long-term ill-will.

My unasked-for advice on all this is simple: Take a page from Steve Ballmer's playbook. You can be just as competitive as before, and make more money for your shareholders than ever, without being tripped up by constant charges of misbehavior. Intel, like Microsoft, should be working on a new global role for itself, viewed by other CEOs and country presidents as a statesman. Monopolists that act like monopolists are constantly in trouble, so move beyond it.

Intel is facing a huge new challenge, as you and the company search for major new markets, both geographic and by product. The history of the WiMax standard meetings would be documentation of the company at its worst. And yet, the world (as well as Intel) benefits if your investment practices create a broadband wireless standard. Intel was booted right out of the cellphone/mobile space not long ago, and having (competitive broadband technology) LTE beat WiMax in the marketplace (a fate the rumor mill is discussing this week) would not do you, or the company, any good at all.

If Intel's future depends not only upon having smart engineers, but upon evangelizing new standards, visions and product uses, then it only makes sense for you and the company to start working on models that allow many winners, and not just one.

This is the best, most successful future open to Intel today, and it ought to be tailor-made for a market-maven CEO. I have been an Intel supporter for a long time, and I look forward to being one again. Is it possible that I have a higher vision for the company than you? For the sake of all your stakeholders, I hope not.

Mark Anderson is CEO of Strategic News Service (TM), publisher of the technology industry's most accurate publicly-ranked predictive letter, at www.stratnews.com. He is also CEO of SNS Project Inkwell (TM), bringing appropriate technology design standards to K-12 classrooms (www.projectinkwell.com), and Chair of the "Future in Review (TM)" Conferences (www.futureinreview.com). He is a Contributing Editor to the Industry Standard.

Disclosure: I own stock in Intel.

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An Open Letter to Intel CEO Paul Otellini