Otellini

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Last month, Intel CEO Paul Otellini stated, “We’re doing product refreshes every two years, which is the model we invented and then stopped doing after Pentium 4, shame on us,” Otellini said. “We fell off it — mea culpa, we screwed up — and now we’re back on that pace.”

Otellini was speaking at a Morgan Stanley Technology Conference, but regardless of the venue, every time a CEO speaks, he or she is using analysts and journalists as a conduit to shareholders. When a CEO takes a podium to apologize to shareholders, it tends to be the board of directors’ idea.

This is an obtuse, though profuse apology. The screwup to which Otellini refers is his decision to clear Intel’s shelves of x86 property and dump it on AMD in one drop so that Intel could end the year with a bang, having had the last volley in the CPU wars. It did that. But one could liken Intel’s strategy in latter 2006 to a massive spread of fireworks that’s sent up simultaneously. Everybody goes nuts at the spectacle of it, but after that brief rush, all that’s left is silence and smoke, soon followed by the glow of taillights.

As tacky as it is to quote oneself, I put Otellini’s present bind succinctly in a column I wrote last August when I wrote that Intel had concentrated its efforts “on Core microarchitecture. From here, the only place Intel can go is bigger cache, more cores and faster clocks.”

Indeed, that sums up Intel’s plans for 2007, and there’s no swaggering spin, distraction or buzzword bending that can make up for the enormous technology gap between Core 2 and AMD’s reengineered Barcelona quad-core Opteron. It isn’t likely that Intel can play engineering catch-up, given that Otellini has pink-slipped 10,500 workers.

Otellini will have more than empty cupboards and empty desks to apologize for. He set a strategy to bulk up Intel’s manufacturing capacity and to jam up AMD by forcing prices down and leaving AMD unable to meet spiked market demand. Market demand is sagging, and if it returns, AMD has the capacity advantage: It has third-party foundries standing ready to stamp out AMD CPUs if need be.

Another example of poor judgment is Otellini’s fixation on CPUs and chip sets. AMD’s acquisition of ATI put Intel’s rival in the high-margin peripherals business as well as a growing role in high-performance chip sets for Intel desktop and notebook PCs. Intel’s hostile attitude toward chip-set makers drove graphics and chip-set giant Nvidia to make surprisingly close ties with AMD despite its purchase of Nvidia’s sole competitor.

If only it ended there. Recently, Intel informed the Delaware Federal District Court that it cannot produce relevant e-mail messages that were exchanged after the filing date of AMD’s antitrust suit. Intel’s letter to the court blames individual human error while heaping detailed praise on executives’ document retention plan. Buried in the text is the Nixonian counterpoint, “Some of the tapes appear to have been recycled.”

It’s not that Otellini hasn’t done anything right. He did put the brakes on NetBurst. He won an exclusive with Apple and got Sun to add Intel to its product line.

Intel’s CEO should be gilding his parachute. If he lasts out the year, it will be because Intel’s board wisely takes its time to choose a replacement. My litmus test? Find someone who believes that Intel’s yearly sponsorship of the A. M. Turing Award matters more than convincing a judge that evidence got lost. And find a CEO who, when he or she apologizes for lousy decisions, uses the pronouns “I” and “me.”

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Yager is chief technologist of the InfoWorld Test Center.

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Jim Love, Chief Content Officer, IT World Canada

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