Intel Corporation
Fact File:
Founders: Robert Noyce and Gordon Moore.
Distinction: Invented microprocessor, paving way for computer
revolution.
Primary Products: Computer chips, networking and communications
gear.
Annual sales: $29.389 billion.
Number of employees: 70,200.
Major competitors: Advanced Micro Devices, IBM, Motorola.
Chairman Emeritus: Gordon E. Moore; Chairman: Andrew S. Grove;
President and CEO: Craig R. Barrett.
Headquarters: Santa Clara, Ca.
Year founded: 1968.
Web site: www.intel.com.
Some say Intel became the top computer-chip maker in the world simply
because it invented the tiny chips that now control everything from
computers and cell phones to toys and thermostats. Others contend the
firm's number-one position stems primarily from its manufacturing
prowess, which enabled almost flawless production of millions of chips
since they were first introduced some three decades ago. Still others
insist it comes from the brilliant management team that founded the
company long before high-tech was fashionable, and then kept it on the
cutting edge of a rapidly growing industry.
In retrospect, though, it actually may have more to do with a
revolutionary advertising campaign centered on two basic words-Intel
Inside. This little phrase transformed the once obscure corporation into a
hot brand well-known in the world. By using traditional marketing
techniques to spotlight a nontraditional item, Intel drove consumers to
insist that its hidden but critical products were central to the electronic
gear they began purchasing by the truckload. Its pioneering position,
exceptionally efficient production techniques, and extraordinary corporate
administration all played a significant part in the company's rise. But
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without an attention-grabbing ad campaign that began with dancing
technicians in colorful bunny suits and ended in the four musical tones
that became its audio tagline, Intel may never have achieved such worldchanging
status.
With it, of course, the company captured more than 80 percent of the
market share for the driving force behind today's computers. It also
became largely responsible for making these now omnipresent
devices affordable yet more powerful than the room-sized units
once used to launch rockets into space. And it set the stage for
developments that led to other electronic gadgets, ultimately
reshaping our world in ways that could never have been imagined
when the company first opened for business during the social and
political upheaval of the late 1960s.
Like most companies that transformed the way we live and work,
however, Intel has never been able to rest on its laurels. Increasing
competition and major changes in the products they offer, have forced it
to steadily implement significant shifts in strategy and direction in order
to retain its lofty corporate perch.
A microprocessor is a tiny electronic circuit containing thousands (or even
millions) of interconnected transistors that work together to store and
manipulate data for various purposes. It commonly serves today as the
brains inside a personal computer, but is also responsible for the
mechanism behind a telephone's speed dial, an alarm clock's automatic
controls, even an automobile's electronic braking and door-locking
systems. Before its invention, the latter functions did not exist and
computer filled entire rooms. After Intel co-founders Robert Noyce
and Gordon Moore developed the first microprocessor in the mid-
1960s, everything changed-although the transformation certainly
did not occur overnight.
The breakthrough, which came while Noyce and Moore were working at a
company called Fairchild Semiconductor, enabled such integrated circuitry
to be so reduced in size that it could be placed onto a single silicon chip.
Many of their peers were initially skeptical of its feasibility, but the two
envisioned enormous potential at an ever-accelerating pace. Moore, in
fact, forecasted in 1965 that the performance of subsequent
circuits would rise exponentially but predictably over ensuing
years. His speculation, later dubbed Moore's Law, was that new chips
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released every 18 to 24 months would be approximately twice as powerful
as their immediate predecessors. Over time, his estimation proved
remarkably accurate.
Noyce and Moore left Fairchild in the summer of 1968 to start a company
that would manufacture these innovative circuits. The new enterprise,
initially named NM Electronics, opened in Mountain View, Ca., with
a dozen scientists who shared their vision. Among them was
Andrew Grove, a native of Budapest, Hungary, who was named
director of operations. The group soon changed its corporate
moniker to Intel, short for "integrated electronics," and moved
into high gear.
Intel intended from the start to make its designs commercially viable,
although at first they were at least 100 times more expensive than
prevailing technologies. Noyce, Moore, and Grove, however, felt confident
that their circuits' size, performance and minimal energy requirements
would soon draw interest from manufacturers. During their first year they
took in less than $2,700. But word spread and interest grew in the
company. Their big breakthrough came when a Japanese company asked
Intel to design a set of chips for a programmable calculator. Engineer Ted
Hoff responded with a new way to place the array of chips necessary on a
single platform, and the microprocessor was born. Most significantly-for
the future of Intel, and the industry it was initiating-his design could also
be used unchanged in other applications.
After that, Intel took off. It developed a "dynamic random access
memory" or DRAM chip in 1970, which quickly became the world's
best-selling semiconductor device. To keep up with future demand,
the company relocated to larger facilities on a 26-acre pear orchard near
the town of Santa Clara. Within months, Intel unveiled its 4004
microprocessor. This remarkable device delivered as much computing
power as the world's first electronic computer, ENIAC, which needed
18,000 vacuum tubes spread over 3,000 cubic feet to perform 60,000
instructions per second-an astounding feat at the time. Intel's offering, on
the other hand, could do the same thing with 2,800 transistors packed
into a space smaller than a thumbnail and cost just $200. With its
introduction, both Intel and the computer revolution were on their way.
In 1972 the company introduced its 8008 microprocessor, which was
twice as powerful as the previous model. Novel applications quickly
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appeared, and the 8008 was soon a part of grocery store scales,
restaurant inventory control devices, and stop lights. Two years later, it
was used in the fist personal computer, the Altair. The idea took off, and
Intel rose with it. Within a few years, Fortune magazine named the
company one of the "Business Triumphs of the Seventies."
By 1981, Intel's microprocessor selection had grown to include the 8086
and 8088. These grabbed the attention of IBM, which was secretly
planning its own personal computer. At the time, Intel was happy with
accounts yielding 10,000 orders a year. The IBM-PC, which ultimately
employed the 8088, eventually generated more than 1,000 times that
number of microprocessor sales. And, with it, Intel hit the big time.
The company didn't stop there, of course. In 1982 it introduced the 286
chip with about three times the performance of other microprocessors. Its
386, which appeared in 1985, was capable of handling more than 5
million instructions every second. The 486 followed in 1989, and was not
only 50 times faster than the original 4004 but could equal the
performance of most mainframe computers. And then in 1993 Intel
introduced the Pentium, which utilized 3.1 transistors to perform up to 90
million instructions per second-or about 1,500 times more than its original
model. Grove, by then president and CEO, knew he had a landmark
product and wanted to tell the world about it. He earmarked $100
million for a unique marketing campaign and began extensively
advertising Intel's products on TV and in print. Most observers
thought he was crazy. After all, consumers couldn't go out and buy an
Intel processor even if they wanted to.
Andy Grove was responsible for the Intel Inside campaign, which
was an effort to aggressively market their chips. Intel was the top
manufacturer of microprocessors at the time, but clone makers were
starting to cut into the market with low priced knock offs. The ads were
designed to make consumers demand their name brand chips, and it also
indirectly rewarded computer manufacturers who touted their association
with Intel. When Grove became CEO in 1987, there was no promotional
budget for the consumer market; by the late 1990s it exceeded $100
million annually. Its operation continues, as evidenced by the way they
rolled out the Pentium III chip in 1999. The global ad campaign was
estimated to cost as much as $150 million. It was designed to position
Intel as a hip dotcom company and simultaneously tie the new chip to
more full enjoyment of the Internet experience.
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The effort did generate tremendous name recognition, though, and
suddenly everyone wanted a computer with "Intel Inside." Soon, in
conjunction with the domination Microsoft was attaining with its Windows
operating system, the public began referring to the duopoly driving the
vast majority of all personal computers as "Win-tel."
Grove became corporate chairman in 1997, a few months before being
named Time Magazine's "Man of the Year". Grove eventually turned over
the other top spots to Craig Barrett. Intel unveiled new technology
designed to enhance a PC's multimedia performance, and reinforced its
brand image by further deploying the colorful characters made famous in
its commercials. The company also split into three divisions-
Enthusiasts/Professional, Performance, and Basis PC-to match the market
segments developing throughout the industry.
Nonetheless, momentum stalled after a decade of continuous growth.
Attempts to enter new areas such as video conferencing failed, while
consumers began demanding less complex devices to simply access the
World Wide Web. Even more ominously, the Federal Trade Commission
initiated an antitrust suit charging Intel with suppressing competition. The
combination did result in new competition from upstarts, such as Cyrix
and Advanced Micro Devices, though, and in 1998 earnings declined for
the first time in more than a decade.
Barrett responded by breaking up Intel's centralized management and
freeing up cash for a series of acquisitions. The days of solely
concentrating on PC microprocessors ended as Barrett began reshaping
the company as a supplier of semiconductors for networking equipment
and information appliances as well as computers. He also explored new
areas including e-commerce and consumer electronics.
When the new century began, Barrett reinforced those moves with
additional acquisitions and expansions-although PC components still
accounted for 90 percent of Intel's revenues all of its profits. It
accordingly kept releasing faster and even more powerful chips to
continue building upon the impressive developments that helped it change
the world. As co-founder (and now chairman emeritus) Gordon Moore has
noted: "If the auto industry advanced as rapidly as the semiconductor
industry, a Rolls Royce would get a half a million miles per gallon, and it
would be cheaper to throw it away than to park it." If Intel had been in,
charge, he implied, that just might be the case.
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