September 3, 2006
Intel from the inside
(c) copyright View from Silicon Valley, 2006. All rights
reserved.
One of our readers with knowledge of the workings at Intel
shared some interesting insight with us on "What's really happening." We found it fascinating in no small part
for the similarities to the Intel culture one of our staff experienced when working there over 20 years ago. (Maybe
those insights, along with our forecast on how any upcoming layoffs will actually impact Intel, will become fodder
for a future missive.)
Meanwhile, we thought you would enjoy reading a view of,
"Intel from the inside":
* * * * *
Most likely around 15,000 will be 'redeployed' or let go. Redeployment essentially means
a layoff, as there are no internal jobs available.
Those let go will likely receive two months of pay plus a week's pay per year of service, and
would need to exercise any eligible options within 90 days.
The cuts would likely be heavy in the area of Marketing, Corporate Services, etc. (non-core),
and wil be relatively light in Manufacturing, Design, etc. (core). Domestic sites should expect harder hits
than international ones. Politically savvy managers and individual contributors are likely to have a higher survival
rate, regardsless of their performance.
The main reasons why Intel needs to do this are well known.
Intel is bloated. Too many people were hired in recent years. There was empire building
going on in non-core areas such as Coprorate Services. (Several VPs who allowed this build-up were the first to let
go, ahead of the approximately one thousand managers who were let go in July).
The litany of mistakes is long.
1) Craig Barrett went on a binge during 1999-2001 buying companies at inflated prices.
He was prasied even by Andy Grove as a risk-taker who moved more decisively than he himself would have. The belief was
that internet-spawned growth would be infinite, and Intel would need to expand aggressively into non traditional communication
technology areas to achieve 20% + growth rates. (A total blunder, as we have seen now. A $10 billion blunder)
2) Paul Otellini came up with the platformizaton idea. He effectively presented it to bump
the others such as Mike Splinter (Apllied Materials CEO now) in the race to be Craig Barrett's successor. That was good.
But Otellini erred in while he thought he was going to grow Intel to be a $70 billion business by
2008. Business units were allowed to use the excuse of needing to grow themselves to meet the needs of a $70 billion
company. Sveral thousands were hired. However, there was a big protest within the senior management ranks who
tried to convince Otellini that perhaps a $51billion goal would be achievable by 2008, and no more, etc. It looks like
the nay-sayers had better business sense then their CEO.
3) Intel persisted with bad decisions to back poor designs, such as P4 and Itanium 1. Senior
VPs in charge were nor realistic, and were stubborn to alter their views or coursedespite much evidence pointing to the need
for change. They even thwarted internal attempts to hedge design bets ('Yamhill', etc.). They finally paid the
price and left Intel recently, but it was too late. AMD had effectively utilized the lack of performance of Intel products
to inflict serious blows.
4) Intel shoots itself in the foot every year through its performance evaluation process
and manadatory quotas for negative messages and zero raises. There are no checks and balances in the system to curb
managerial power to get folks to toe the line. Many talented people leave feeling victimized by the system.
5) Prestige is measured by the number of people each group has in it, with a built-in drive
to hire more people than needed. Functions are duplicated between different groups, encouraging never ending turf wars.
This really escalated last year, with each group trying to hang on to scope as Otellini attempted to streamline the organizations.
6) Otellini hired Eric Kim away from Samsung a year ago, and gave him enormous power to
reshape the brand image and marketing strategy (Viiv etc, are Eric's ideas). There was a lot of resentment among senior
VPs (all engineers) that marketing was given ascendency over engineering and technology, and they were having to realign to
things they did not necessarily agree with. Kim did a great job for Samsung, but
could not repeat the success at Intel, (he was probably asked to accomplish too much too fast!) and was essentially demoted
last month.
There are others...
All said, Intel will probably emerge a better company after the layoffs as the recent product
introductions are good, the product road map is promising, and may be some dead wood would be cast away next week. On
the other hand, there is a possibility that the business group general managers act
self-servingly (several of these fit the 'dead wood' description) and use the opportunity to preserve the yes-men and to get
rid of those who might challenge their clout.
* * * * *
We hope you enjoyed this piece written by one of our readers.
* * * * * *
Opinions expressed are not necessarily those of View from
Silicon Valley. The opinions are subject to change, are not guaranteed and should not be considered recommendations to
buy or sell any security.
The above is not intended
as advice to buy, sell or hold any stock, bond, real estate nor any other financial product or service. Buy and sell at your
own risk (just like we do.)
* * * * *
