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Intel Corporation

Intel Corporation

2200 Mission College Boulevard
Santa Clara, California 95052-8119
U.S.A.
Telephone: (408) 765-8080
Toll Free: (800) 628-8686
Fax: (408) 765-9904
Web site: http://www.intel.com

Public Company
Incorporated:
1968 as N M Electronics
Employees: 70,200
Sales: $34.21 billion (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: INTC
NAIC: 334413 Semiconductor and Related Device Manufacturing; 334210 Telephone Apparatus Manufacturing

Intel Corporation is the largest semiconductor manufacturer in the world, with 11 fabrication facilities and six assembly and test facilities around the world. Intel has changed the global marketplace dramatically since it was founded in 1968; the company invented the microprocessor, the "computer on a chip" that made possible the first handheld calculators and personal computers (PCs). By the early 21st century, Intel's microprocessors were found in approximately 80 percent of PCs worldwide. The company's product line also includes chipsets and motherboards; flash memory used in wireless communications and other applications; networking devices and equipment for accessing the Internet, local area networks, and home networks; and embedded control microchips used in networking products, laser printers, factory automation instruments, cellular phone base stations, and other applications. Intel has remained competitive through a combination of clever marketing, well-supported research and development, superior manufacturing proficiency, a vital corporate culture, prowess in legal matters, and an ongoing alliance with software giant Microsoft Corporation often referred to as "Wintel."

196879: From DRAM to the 8086

Intel's founders, Robert Noyce and Gordon Moore, were among the eight founders of Fairchild Semiconductor Corporation, established in 1957. While at Fairchild, Noyce and Moore invented the integrated circuit; in 1968, they decided to form their own company. They were soon joined by Andrew Grove, a Hungarian refugee who had arrived in the United States in 1956 and joined Fairchild in 1963. Grove would remain president and CEO of Intel into the 1990s.

To obtain start-up capital, Noyce and Moore approached Arthur Rock, a venture capitalist, with a one-page business plan simply stating their intention of developing large-scale integrated circuits. Rock, who had helped start Fairchild Semiconductor, as well as Teledyne and Scientific Data Systems, had confidence in Noyce and Moore and provided $3 million in capital. The company was incorporated on July 18, 1968, as N M Electronics (the letters standing for Noyce Moore), but quickly changed its name to Intel, formed from the first syllables of "integrated electronics." Intel gathered another $2 million in capital before going public in 1971.

Noyce and Moore's scanty business proposal belied a clear plan to produce large-scale integrated (LSI) semiconductor memories. At that time, semiconductor memories were ten times more expensive than standard magnetic core memories. Costs were falling, however, and Intel's founders surmised that with the greater speed and efficiency of LSI technology, semi-conductors would soon replace magnetic cores. Within a few months of its startup, Intel produced the 3101 Schottky bipolar memory, a high-speed random access memory (RAM) chip. The 3101 proved popular enough to sustain the company until the 1101, a metal oxide semiconductor (MOS) chip, was perfected and introduced in 1969. The following year, Intel introduced the 1103, a 1-kilobyte (K) dynamic RAM, or DRAM, which was the first chip large enough to store a significant amount of information. With the 1103, Intel finally had a chip that really did begin to replace magnetic cores; DRAMs eventually proved indispensable to the personal computer.

The company's most dramatic impact on the computer industry involved its 1971 introduction of the 4004, the world's first microprocessor. Like many of Intel's innovations, the microprocessor was a byproduct of efforts to develop another technology. When a Japanese calculator manufacturer, Busicom, asked Intel to design cost-effective chips for a series of calculators, Intel engineer Ted Hoff was assigned to the project; during his search for such a design, Hoff conceived a plan for a central processing unit (CPU) on one chip. The 4004, which crammed 2,300 transistors onto a one-eighth- by one-sixth-inch chip, had the power of the old 3,000-cubic-foot ENIAC computer, which depended on 38,000 vacuum tubes.

Although Intel initially focused on the microprocessor as a computer enhancement that would allow users to add more memory to their units, the microprocessor's great potentialfor everything from calculators to cash registers and traffic lightssoon became clear. The applications were facilitated by Intel's introduction of the 8008, an 8-bit microprocessor developed along with the 4004 but oriented toward data and character (rather than arithmetic) manipulation. The 8080, introduced in 1974, was the first truly general purpose microprocessor. For $360, Intel sold a whole computer on one chip, while conventional computers sold for thousands of dollars. The response was overwhelming. The 8080 soon became the industry standard and Intel the industry leader in the 8-bit market.

In response to ensuing competition in the manufacture of 8-bit microprocessors, Intel introduced the 8085, a faster chip with more functions. The company was also developing two more advanced projects, the 32-bit 432 and the 16-bit 8086. The 8086 was introduced in 1978 but took two years to achieve wide use, and, during this time, Motorola, Inc. produced a competing chip (the 68000) that seemed to be selling faster. Intel responded with a massive sales effort to establish its architecture as the standard. When International Business Machines Corporation (IBM) chose the 8008, the 8086's 8-bit cousin, for its personal computer in 1980, Intel seemed to have beat out the competition.

During the 1970s, Intel had also developed the erasable programmable read-only memory (EPROM), another revolutionary but unintended research byproduct. Intel physicist Dov Frohman was working on the reliability problems of the silicon gate used in the MOS process when he realized that the disconnected, or "floating," gates that were causing malfunctions could be used to create a chip that was erasable and reprogrammable. Since conventional ROM chips had to be permanently programmed during manufacture, any change required the manufacture of a whole new chip. With EPROM, however, Intel could offer customers chips that could be erased and reprogrammed with ultraviolet light and electricity. At its introduction in 1971, EPROM was a novelty without much of a market. But the microprocessor, invented at the same time, created a demand for memory; the EPROM offered memory that could be conveniently used to test microprocessors.

Another major development at Intel during this time was that of peripheral controller chips. Streamlined for specific tasks and stripped of unneeded functions, peripheral chips could greatly increase a computer's abilities without raising software development costs. One of Intel's most important developments in peripherals was the coprocessor, first introduced in 1980. Coprocessor chips were an extension of the CPU that could handle specific computer-intensive tasks more efficiently than the CPU itself. Once again, innovation kept Intel ahead of its competition.

Intel's rapid growth, from the 12 employees at its founding in 1968 to 15,000 in 1980, demanded a careful approach to corporate culture. Noyce, Moore, and Grove, who remembered their frustration with Fairchild's bureaucratic bottlenecks, found that defining a workable management style was important. Informal weekly lunches with employees kept communication lines open while the company was small, but that system had become unwieldy. Thus, the founders installed a carefully outlined program emphasizing openness, decision-making on the lowest levels, discipline, and problem solving rather than paper shuffling. Moreover, the company's top executives eschewed such luxuries as limousines, expense account lunches, and private parking spaces to establish a sense of teamwork with their subordinates.

In an interview with the Harvard Business Review in 1980, Noyce remarked on the company's hiring policy, stating, "we expect people to work hard. We expect them to be here when they are committed to be here; we measure absolutely everything that we can in terms of performance." Employee incentives included options on Intel stock, and technological breakthroughs were celebrated with custom-bottled champagne"Vintage Intel" marked the first $250 million quarter, in 1983the year sales reached $1 billion for the first time.

Company Perspectives:

For over 35 years, Intel Corporation has developed technology enabling the computer and Internet revolution that has changed the world. Founded in 1968 to build semiconductor memory products, Intel introduced the world's first micro-processor in 1971. Today, Intel supplies the computing and communications industries with chips, boards, systems, and software building blocks that are the "ingredients" of computers, servers and networking and communications products. These products are used by industry members to create advanced computing and communications systems. Intel's mission is to do a great job for our customers, employees, and stockholders by being the preeminent building block supplier to the worldwide digital economy.

1980s: From 286 to 486

During the 1974 recession, Intel was forced to lay off 30 percent of its employees, and morale declined substantially as a result. Thus, in 1981, when economic struggles again surfaced, instead of laying off more employees, Intel accelerated new product development with the "125 Percent Solution," which asked exempt employees to work two extra hours per day, without pay, for six months. A brief surge in sales the following year did not last, and, again, instead of more layoffs, Intel imposed pay cuts of up to 10 percent. Such measures were not popular among all its workforce, but, by June 1983, all cuts had been restored and retroactive raises had been made. Moreover, in December 1982, IBM paid $250 million for a 12 percent share of Intel, giving the company not only a strong capital boost, but also strong ties to the undisputed industry leader. IBM would eventually increase its stake to 20 percent before selling its Intel stock in 1987.

During the early 1980s, Intel began to slip in some of its markets. Fierce competition in DRAMs, static RAMs, and EPROMs left Intel concentrating on microprocessors. While competitors claimed that Intel simply gave away its DRAM market, Moore told Business Week in 1988 that the company deliberately focused on microprocessors as the least cyclical field in which to operate. Customer service, an area Intel had been able to overlook for years as it dominated its markets, became more important as highly efficient Japanese and other increasingly innovative competitors challenged Intel's position. In addition, Intel's manufacturing record, strained in years past by undercapacity, needed fixing. Fab 7, Intel's seventh wafer-fabrication plant, opened in 1983 only to face two years of troubled operations before reaching full capacity. Between 1984 and 1988, Intel closed eight old plants, and in 1988 it spent some $450 million on new technology to bring its manufacturing capacity into line with its developmental prowess.

Despite these retrenchments, the company continued to excel in the microprocessor market. In 1982 Intel introduced its 80286 microprocessor, the chip that quickly came to dominate the upper-end PC market, when IBM came out with the 286-powered PC/AT. The 286 was followed in 1985 by Intel's 80386 chip, popularized in 1987 by the Compaq DESKPRO 386, and which, despite bugs when it first came out, became one of the most popular chips on the market. While the 286 brought to the personal computer a speed and power that gave larger computers their first real challenge, the 386 offered even greater speed and power together with the ability to run more than one program at a time. The 386 featured 32-bit architecture and 275,000 transistors, more than twice the number of the 286.

In 1989 Intel introduced the 80486, a chip Business Week heralded as "a veritable mainframe-on-a-chip." The 486 included 1.2 million transistors and the first built-in math coprocessor, and was 50 times faster than the 4004, the first microprocessor. In designing the i486, Intel resisted an industry trend toward RISC (reduced instruction-set computing), a chip design that eliminated rarely used instructions in order to gain speed. Intel argued that what RISC chips gained in speed they lost in flexibility and that, moreover, RISC chips were not compatible with software already on the market, which Intel felt would secure the 486's position. A new chip, the 64-bit i860 announced in early 1989, however, did make use of RISC technology to offer what Intel claimed would be a "supercomputer on a chip."

Also in 1989, a major lawsuit that Intel had filed against NEC Corporation five years before was decided. Intel had claimed that NEC violated its copyright on the microcode, or embedded software instructions, of Intel's 8086 and 8088 chips. Although Intel had licensed NEC to produce the microcode, NEC had subsequently designed a similar chip of its own. At issue was whether microcode could be copyrighted. The court ruled that it could but that NEC had not violated any copyright in the case at hand. The suit made public some issues surrounding Intel's reputation. Some rivals and consumers, for example, claimed that Intel used its size and power to repress competition through such tactics as filing "meritless" lawsuits and tying microprocessor sales to other chips. Other observers, however, praised Intel's protection of its intellectual property and, subsequently, its profits. The Federal Trade Commission conducted a two-year investigation of Intel's practices and did not recommend criminal charges against the company, but two rival companies, Advanced Micro Devices, Inc. (AMD) and Cyrix Corporation, filed antitrust lawsuits against Intel in 1993.

1990s: The Pentium Decade

Intel's annual net income topped $1 billion for the first time in 1992, following a very successful, brand-building marketing campaign. Intel ads aggressively sought to bolster consumer interest in and demand for computers that featured "Intel Inside." By late 1993, the company's brand equity totaled $17.8 billion, more than three times its 1992 sales. Also during this time, Intel began to branch out from chipmaking. In 1992 the company's Intel Products Group introduced network, communications, and personal conferencing products for retail sale directly to PC users.

In 1993 Intel released its fifth-generation Pentium processor, a trademarked chip capable of executing over 100 million instructions per second (MIPS) and supporting, for example, real-time video communication. The Pentium processor, with its 3.1 million transistors, was up to five times more powerful than the 33-megahertz Intel 486 DX microprocessor (and 1,500 times the speed of the 4004), but, in an unusual marketing maneuver, the company suggested that "all but the most demanding users" would seek out PCs powered by the previous chip. The Pentium's reputation was initially sullied by the revelation of an embedded mathematical flaw, but Intel moved quickly to fix the problem.

Key Dates:

1968:
Robert Noyce and Gordon Moore incorporate N M Electronics, which is soon renamed Intel Corporation.
1970:
Company develops DRAM, dynamic RAM.
1971:
Intel introduces the world's first microprocessor (the 4004) and goes public.
1974:
Company introduces the first general purpose microprocessor (the 8080).
1980:
IBM chooses the Intel microprocessor for the first personal computer.
1983:
Revenues exceed $1 billion for the first time.
1992:
Net income tops $1 billion for the first time.
1993:
The fifth generation chip, the Pentium, debuts.
1996:
Revenues surpass $20 billion, net income exceeds $5 billion.
1997:
Company introduces the Pentium II microprocessor.
1999:
Intel debuts the Pentium III and is added to the Dow Jones Industrial Average.
2000:
The Pentium 4 hits the market.
2003:
The Centrino technology for mobile computers is launched.

The company enjoyed a dramatic 50 percent revenue increase in 1993, reaching $8.78 billion from $5.84 billion in 1992. Moreover, Intel's net income leapt 115 percent to $2.3 billion, repudiating Wall Street's worries that competition had squeezed profit margins. While Intel faced strong competition both from chip makers such as Motorola's PowerPC and former partner IBM, its place at the leading edge of technology was undisputed.

A key initiative that kept Intel ahead of its competitors was the company's move beyond chip design into computer design. With the advent of the Pentium, Intel began designing chipsets and motherboards, the latter being the PC circuit board that combined a microprocessor and a chipset into the basic subsystem of a PC. With the company now selling the guts of a PC, dozens of computer manufacturers began making and selling Pentium-based machines.

In the mid-1990s, as sales of PCs accelerated and multimedia and the Internet were beginning to emerge, Intel continued developing ever more powerful microprocessors. In 1995 the Pentium Pro hit the market sporting 5.5 million transistors and capable of performing up to 300 MIPS. Intel next added MMX technology to its existing line of Pentium processors. MMX consisted of a new set of instructions that was designed specifically to improve the multimedia performance of personal computers. Fueled by exploding demand, revenues hit $20.85 billion by 1996, while net income soared to $5.16 billion.

At this point Intel was continuing its longtime strategy of designing new, more powerful chips for the top end of the market while allowing previous-generation microprocessors to migrate down to the lower segments of the market. With the introduction of the Pentium II in May 1997, however, the company adopted a new strategy of developing a range of microprocessors for every segment of the computing market. The Pentium II, with 7.5 transistors, debuted with a top-end model that clocked at 300 megahertz. Originally designed for high-end desktop PCs, the Pentium II was soon adapted for use in notebook and laptop computers. With the following year came the launch of the Celeron processor, which was designed specifically for the value PC desktop sector, a rapidly growing segment of the market ever since the early 1997 debut of a sub-$1,000 PC from Compaq. Also in 1998 Intel for the first time designed a microprocessor, the Pentium II Xeon, especially for midrange and higher-end servers and workstations. At the same time Intel was moving into another burgeoning sector, that of embedded control chips for networking and other applications, such as digital set-top boxes.

Meanwhile Intel settled a dispute with Digital Equipment Corporation (DEC) over the development of the Pentium chip by acquiring DEC's semiconductor operations. In May 1997 Craig R. Barrett was named president of Intel, having joined the company in 1974, serving as head of manufacturing starting in 1985, and being named chief operating officer in 1993. Grove remained chairman and CEO for one year, whereupon Barrett was named president and CEO, with Grove retaining the chairmanship. In early 1999 Intel reached a settlement with the Federal Trade Commission on an antitrust suit, thereby avoiding the protracted litigation and negative publicity that beset its Wintel partner, Microsoft, in the late 1990s. Reflecting the increasing importance of technology to the U.S. economy, Intel was added to the Dow Jones Industrial Average in November 1999.

During the late 1990s Intel made several strategic acquisitions that rapidly gave the company a significant presence in areas outside its microprocessor core: wireless communications products, such as flash memory for mobile phones and two-way pagers; networking building blocks, such as hubs, switches, and routers; and embedded control chips for laser printers, storage media, and automotive systems. Intel also entered the market for e-commerce services, rapidly building up the largest business-to-business e-commerce site in the world, with $1 billion per month in online sales by mid-1999. The company was not neglecting its core, however; in 1999 Intel had its largest microprocessor launch ever with the simultaneous introduction of 15 Pentium III and Pentium III Xeon processors.

New Strategies in the Less Buoyant Early 2000s

The new product launches continued in 2000, but they were accompanied by an uncharacteristic series of blunders. In February arch-rival AMD had bested Intel by releasing the first 1-gigahertz chip, the Athlon, which had the added benefit of being cheaper than the Pentium III. Intel responded by speeding a 1.13-gigahertz version of the Pentium III to market, but the processor simply did not work right and thousands had to be recalled. Further embarrassment came when the firm had to recall a million motherboards because of a faulty chip. Intel had also underestimated growth in PC sales, leaving its production capacity insufficient to meet the demands of computer makers, and it also cancelled plans to develop a low-end microprocessor called Timna that had been slated for budget PCs. Intel continued to encounter problems developing the complex Itanium 64-bit processor, the company's first, which was specifically designed, in partnership with Hewlett-Packard Company, to meet the needs of powerful Internet servers. The long-delayed Itanium, seven years in the making at a cost of $2 billion, finally reached the market in 2001, receiving a rather muted initial reception. (The Itanium line was later shifted from servers to high-end computers.) On the bright side, Intel successfully released the Pentium 4 in November 2000. This processor included 42 million transistors and ran at an initial speed of 1.5 gigahertz, enabling Intel to regain the lead in the ongoing chip-speed battle with AMD. Despite all of the year's travails, Intel reached new heights in financial performance, earning $10.54 billion in profits on revenues of $33.73 billion.

The bursting of the Internet bubble posed new challenges for Intel in 2001 as consumer spending on computers dropped off and corporate information technology managers pulled back as well. The fierce competition from AMD prompted Intel to initiate a brutal price war, which cut both revenues and profits, and it also slashed Intel's worldwide share of the microprocessor market to below 80 percent, compared to the 86.7 percent figure from 1998. In 2001 Barrett began jettisoning many of the new ventures and acquisitions that were part of the late 1990s diversification drive, in a renewed refocusing on microprocessors. Revenues for 2001 fell 21 percent to $26.54 billionthe first such drop since the mid-1980s tech recessionwhile profits plummeted 87 percent to $1.29 billion. Early the following year, Paul Otellini was named president and chief operating officer, with Barrett remaining CEO. Otellini had served in a variety of marketing and management positions since joining the company in 1974, most recently serving as head of Intel's core operating unit, the architecture group, which was responsible for developing microprocessors, chipsets, and motherboards for desktop and notebook computers and for servers.

As the technology downturn continued in 2002, Intel cut thousands of workers from its payroll to reduce costs. Behind the scenes, an important change occurred in the company's approach to designing chips. Since the 1980s Intel had maintained its leading position by creating ever-faster processors. But by the early 2000s speed was becoming less important to the majority of PC users, who were mainly employing their desktop PCs and laptops to surf the Internet and run basic programs, such as word processors. Intel decided to deemphasize speed in favor of designing chips to better fit the way people were actually using their computers and to do so using technology "platforms," which were composed of several chips rather than a single microprocessor. The first fruit of this endeavor was Centrino, launched in early 2003. Centrino was a combination of chips specifically designed for portable computers. It included the Pentium M microprocessor, which while not sporting top speeds consumed much less power than the typical chip, providing for longer battery life (and reduced energy consumption when installed in desktop computers). The Pentium M was also smaller in size, making it less expensive to manufacture. Centrino also included a supporting chipset to further improve battery life and graphics performance as well as a wireless radio chip for connecting to the burgeoning number of wireless (Wi-Fi) networks being installed at corporate offices, in retail outlets, and within homes.

Buoyed by the success of Centrino, Intel's revenues hit a new high in 2004, $34.21 billion, despite a number of manufacturing glitches, product delays, and schedule changes during the year. Intel abandoned its efforts to develop television display chips and also scrapped plans to introduce the first 4-gigahertz processor because of problems with overheating. The profits of $7.52 billion were an impressive 33 percent higher than the previous year but below the peak reached in 2000.

In May 2005 Otellini became only the fifth CEO in Intel history and the first non-engineer. At the same time, Barrett succeeded Grove as chairman. One of the key legacies of Barrett's tenure was surely the huge outlay of capital, as much as $32 billion over six years, expended to rebuild Intel's manufacturing base and enabling the firm to increase capacity to meet chip demand and add capabilities to the products. At the same time, Otellini was credited with leading the push toward platforms, and this approach was institutionalized in a 2005 reorganization that divided the company into five market-focused groups: corporate computing, the digital home, mobile computing, healthcare, and channels (PCs for small manufacturers). Otellini was also shifting the product development effort toward so-called dual-core technology featuring two computing engines on a single piece of silicon. In this realm, Intel was competing fiercely with, and playing catchup to, AMD, which released its first dual-core chips for PCs in 2005, whereas Intel was aiming to produce three lines of dual-core processors, for notebooks, desktops, and servers, during the second half of 2006. Like the Centrino technology, dual-core chips were being developed to extend battery life in laptops and cut power costs for desktop PCs and servers. They were also intended to improve performance while avoiding the problems with overheating that had plagued some of the fastest single-processor models. Intel was simultaneously beginning work on multicore platforms with three or more "brains." Two other developments from mid-2005 held potential long-term significance. AMD filed a wide-ranging antitrust suit in U.S. federal court accusing Intel of using illegal inducements and coercion to discourage computer makers from buying AMD's computer chips. This action followed an antitrust ruling against Intel in Japan, earlier in the year. In the meantime, in what seemed a significant coup, Intel reached an agreement with Apple Computer, Inc. whereby Apple would begin shifting its Macintosh computers from IBM's PowerPC chips to Intel chips.

Principal Subsidiaries

Components Intel de Costa Rica, S.A.; Intel Americas, Inc.; Intel Asia Finance Ltd. (Cayman Islands); Intel Capital Corporation (Cayman Islands); Intel Copenhagen ApS (Denmark); Intel Corporation (UK) Ltd.; Intel Electronics Finance Limited (Cayman Islands); Intel Electronics Ltd. (Israel); Intel Europe, Inc.; Intel International; Intel International B.V. (Netherlands); Intel Ireland Limited (Cayman Islands); Intel Israel (74) Limited; Intel Kabushiki Kaisha (Japan); Intel Malaysia Sdn. Berhad; Intel Massachusetts, Inc.; Intel Overseas G.C. Ltd. (Cayman Islands); Intel Overseas Funding Corporation (Cayman Islands); Intel Phils. Holding Corporation; Intel Products (M) Sdn. Bhd. (Malaysia); Intel Puerto Rico, Ltd. (Cayman Islands); Intel Semiconductor Limited; Intel Technology Finance Limited; Intel Technology Phils., Inc. (Philippines); Intel Technology Sdn. Berhad (Malaysia); Mission College Investments Ltd. (Cayman Islands).

Principal Operating Units

Mobility Group; Digital Enterprise Group; Digital Home Group; Digital Health Group; Channel Platforms Group.

Principal Competitors

Advanced Micro Devices, Inc.; Samsung Electronics Co., Ltd.; Texas Instruments Incorporated; International Business Machines Corporation; STMicroelectronics N.V.

Further Reading

Brandt, Richard, Otis Port, and Robert D. Hof, "Intel: The Next Revolution," Business Week, September 26, 1988, p. 74.

Bylinsky, Gene, "Intel's Biggest Shrinking Job Yet," Fortune, May 3, 1982, pp. 250+.

Clark, Don, "AMD Files Broad Suit Against Intel," Wall Street Journal, June 28, 2005, p. A3.

, "Change of Pace: Big Bet Behind Intel Comeback; In Chips, Speed Isn't Everything," Wall Street Journal, November 18, 2003, p. A1.

, "Intel's New CEO Signals Shift for Chip Maker," Wall Street Journal, November 12, 2004, p. A6.

Clark, Don, and Gary McWilliams, "Intel Bets Big on Wireless Chips," Wall Street Journal, January 9, 2003, p. A3.

Clark, Don, Nick Wingfield, and William M. Bulkeley, "Apple Is Poised to Shift to Intel As Chip Supplier," Wall Street Journal, June 6, 2005, p. A1.

Clark, Tim, "Inside Intel's Marketing Machine," Business Marketing, October 1992, pp. 14-19.

Corcoran, Elizabeth, "Reinventing Intel," Forbes, May 3, 1999, pp. 154-59.

Intel: 35 Years of Innovation, Santa Clara: Intel Corporation, 2003.

Edwards, Cliff, "Getting Intel Back on the Inside Track," Business Week, November 29, 2004, p. 39.

, "Intel: What Is CEO Craig Barrett Up To?," Business Week, March 8, 2004, pp. 56-62, 64.

, "Shaking Up Intel's Insides," Business Week, January 31, 2005, p. 35.

Edwards, Cliff, and Ira Sager, "Intel: Can CEO Craig Barrett Reverse the Slide?," Business Week, October 15, 2001, pp. 80-86, 88, 90.

Edwards, Cliff, and Olga Karif, "This Is Not the Intel We All Know," Business Week, August 16, 2004, p. 32.

Garland, Susan B., and Andy Reinhardt, "Making Antitrust Fit High Tech," Business Week, March 22, 1999, p. 34.

Gottlieb, Carrie, "Intel's Plan for Staying on Top," Fortune, March 27, 1989, pp. 98+.

Grove, Andrew S., Swimming Across: A Memoir, New York: Warner, 2001, 290 p.

Heller, Robert, Andrew Grove, New York: Dorling Kindersley, 2001, 112 p.

Hof, Robert D., Larry Armstrong, and Gary McWilliams, "Intel Unbound," Business Week, October 9, 1995, pp. 148+.

"Is the Semiconductor Boom Too Much of a Good Thing for Intel?," Business Week, April 23, 1984, pp. 114+.

Jackson, Tim, Inside Intel: Andy Grove and the Rise of the World's Most Powerful Chip Company, New York: Dutton, 1997, 424 p.

Kirkpatrick, David, "Intel Goes for Broke," Fortune, May 16, 1994, pp. 62-66, 68.

, "Intel's Amazing Profit Machine," Fortune, February 17, 1997, pp. 60+.

, "Mr. Grove Goes to China," Fortune, August 17, 1998, pp. 154-61.

Lashinsky, Adam, "Is This the Right Man for Intel?," Fortune, April 18, 2005, pp. 110-12+.

Palmer, Jay, "Zero Hour," Barron's, October 4, 1999, pp. 33-34, 36.

Reinhardt, Andy, "Intel Inside Out: After a Year of Bloopers, Can the Chipmaker Get Its House in Order?," Business Week, December 4, 2000, pp. 116-17, 120.

, "The New Intel: Craig Barrett Is Leading the Chip Giant into Riskier Terrain," Business Week, March 13, 2000, pp. 110+.

, "Who Says Intel's Chips Are Down?," Business Week, December 7, 1998, p. 103.

Reinhardt, Andy, Ira Sager, and Peter Burrows, "Intel: Can Andy Grove Keep Profits Up in an Era of Cheap PCs?," Business Week, December 22, 1997, pp. 71-74, 76-77.

A Revolution in Progress: A History of Intel to Date, Santa Clara, Calif.: Intel Corporation, 1984.

Ristelhueber, Robert, "Intel: The Company People Love to Hate," Electronic Business Buyer, September 1993, pp. 58-67.

Roth, Daniel, "Craig Barrett Inside," Fortune, December 18, 2000, pp. 246+.

Schlender, Brent, "Intel's $10 Billion Gamble," Fortune, November 11, 2002, pp. 90-94, 98, 100, 102.

, "Intel Unleashes Its Inner Attila," Fortune, October 15, 2001, pp. 168-70+.

Wilson, John W., "Intel Wakes Up to a Whole New Marketplace in Chips," Business Week, September 2, 1985, pp. 73+.

Yu, Albert, Creating the Digital Future: The Secrets of Consistent Innovation at Intel, New York: Free Press, 1998, 214 p.

                                   April Dougal Gasbarre

                                update: David E. Salamie

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Intel Corporation

Intel Corporation

2200 Mission College Boulevard
Santa Clara, California 95052-8119
U.S.A.
Telephone: (408) 765-8080
Toll Free: (800) 628-8686
Fax: (408) 765-6284
Web site: http://www.intel.com

Public Company
Incorporated:
1968 as N M Electronics
Employees: 70,200
Sales: $29.39 billion (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: INTC
NAIC: 334413 Semiconductor and Related Device Manufacturing; 334210 Telephone Apparatus Manufacturing; 511210 Software Publishers; 541512 Computer Systems Design Services

Intel Corporation is the largest semiconductor manufacturer in the world, with major facilities in the United States, Europe, and Asia. Intel has changed the world dramatically since it was founded in 1968; the company invented the microprocessor, the computer on a chip that made possible the first handheld calculators and personal computers (PCs). By the early 21st century, Intels microprocessors were found in more than 80 percent of PCs worldwide. The companys product line also includes chipsets and motherboards; flash memory used in wireless communications and other applications; hubs, switches, routers, and other products for Ethernet networks; and embedded control chips used in networking products, laser printers, imaging devices, storage media, and other applications. Intel remained competitive through a combination of clever marketing, well-supported research and development, superior manufacturing proficiency, a vital corporate culture, legal proficiency, and an ongoing alliance with software giant Microsoft Corporation often referred to as Wintel.

196879: From DRAM to the 8086

Intels founders, Robert Noyce and Gordon Moore, were among the eight founders of Fairchild Semiconductor, established in 1957. While at Fairchild, Noyce and Moore invented the integrated circuit, and, in 1968, they decided to form their own company. They were soon joined by Andrew Grove, a Hungarian refugee who had arrived in the United States in 1956 and joined Fairchild in 1963. Grove would remain president and CEO of Intel into the 1990s.

To obtain start-up capital, Noyce and Moore approached Arthur Rock, a venture capitalist, with a one-page business plan simply stating their intention of developing large-scale integrated circuits. Rock, who had helped start Fairchild Semiconductor, as well as Teledyne and Scientific Data Systems, had confidence in Noyce and Moore and provided $3 million in capital. The company was incorporated on July 18, 1968, as N M Electronics (the letters standing for Noyce Moore), but quickly changed its name to Intel, formed from the first syllables of integrated electronics. Intel gathered another $2 million in capital before going public in 1971.

Noyce and Moores scanty business proposal belied a clear plan to produce large-scale integrated (LSI) semiconductor memories. At that time, semiconductor memories were ten times more expensive than standard magnetic core memories. Costs were falling, however, and Intels founders felt that with the greater speed and efficiency of LSI technology, semiconductors would soon replace magnetic cores. Within a few months of its startup, Intel produced the 3101 Schottky bipolar memory, a high-speed random access memory (RAM) chip The 3101 proved popular enough to sustain the company until the 1101, a metal oxide semiconductor (MOS) chip, was perfected and introduced in 1969. The following year, Intel introduced the 1103, a one Kilobyte (K) dynamic RAM, or DRAM, which was the first chip large enough to store a significant amount of information. With the 1103, Intel finally had a chip that really did begin to replace magnetic cores; DRAMs eventually proved indispensable to the personal computer.

The companys most dramatic impact on the computer industry involved its 1971 introduction of the 4004, the worlds first microprocessor. Like many of Intels innovations, the microprocessor was a byproduct of efforts to develop another technology. When a Japanese calculator manufacturer, Busicom, asked Intel to design cost-effective chips for a series of calculators, Intel engineer Ted Hoff was assigned to the project; during his search for such a design, Hoff conceived a plan for a central processing unit (CPU) on one chip. The 4004, which crammed 2,300 transistors onto a one-eighth- by one-sixth-inch chip, had the power of the old 3,000-cubic-foot ENIAC computer, which depended on 38,000 vacuum tubes.

Although Intel initially focused on the microprocessor as a computer enhancement that would allow users to add more memory to their units, the microprocessors great potentialfor everything from calculators to cash registers and traffic lightssoon became clear. The applications were facilitated by Intels introduction of the 8008, an 8-bit microprocessor developed along with the 4004 but oriented toward data and character (rather than arithmetic) manipulation. The 8080, introduced in 1974, was the first truly general purpose microprocessor. For $360, Intel sold a whole computer on one chip, while conventional computers sold for thousands of dollars. The response was overwhelming. The 8080 soon became the industry standard and Intel the industry leader in the 8-bit market.

In response to ensuing competition in the manufacture of 8-bit microprocessors, Intel introduced the 8085, a faster chip with more functions. The company was also developing two more advanced projects, the 32-bit 432 and the 16-bit 8086. The 8086 was introduced in 1978 but took two years to achieve wide use, and, during this time, Motorola produced a competing chip (the 68000) that seemed to be selling faster. Intel responded with a massive sales effort to establish its architecture as the standard. When International Business Machines Corporation (IBM) chose the 8008, the 8086s 8-bit cousin, for its personal computer in 1980, Intel seemed to have beat out the competition.

During the 1970s, Intel had also developed the erasable programmable read-only memory (EPROM), another revolutionary but unintended research byproduct. Intel physicist Dov Frohman was working on the reliability problems of the silicon gate used in the MOS process when he realized that the disconnected, or floating, gates that were causing malfunctions could be used to create a chip that was erasable and reprogrammable. Since conventional ROM chips had to be permanently programmed during manufacture, any change required the manufacture of a whole new chip. With EPROM, however, Intel could offer customers chips that could be erased and reprogrammed with ultraviolet light and electricity. At its introduction in 1971, EPROM was a novelty without much of a market. But the microprocessor, invented at the same time, created a demand for memory; the EPROM offered memory that could be conveniently used to test microprocessors.

Another major development at Intel during this time was that of peripheral controller chips. Streamlined for specific tasks and stripped of unneeded functions, peripheral chips could greatly increase a computers abilities without raising software development costs. One of Intels most important developments in peripherals was the coprocessor, first introduced in 1980. Coprocessor chips were an extension of the CPU that could handle specific computer-intensive tasks more efficiently than the CPU itself. Once again, innovation kept Intel ahead of its competition.

Intels rapid growth, from the 12 employees at its founding in 1968 to 15,000 in 1980, demanded a careful approach to corporate culture. Noyce, Moore, and Grove, who remembered their frustration with Fairchilds bureaucratic bottlenecks, found that defining a workable management style was important. Informal weekly lunches with employees kept communication lines open while the company was small, but that system had become unwieldy. Thus, the founders installed a carefully outlined program emphasizing openness, decision making on the lowest levels, discipline, and problem solving rather than paper shuffling. Moreover, the companys top executives eschewed such luxuries as limousines, expense account lunches, and private parking spaces to establish a sense of teamwork with their subordinates.

In an interview with the Harvard Business Review in 1980, Noyce remarked on the companys hiring policy, stating, we expect people to work hard. We expect them to be here when they are committed to be here; we measure absolutely everything that we can in terms of performance. Employee incentives included options on Intel stock, and technological breakthroughs were celebrated with custom-bottled champagneVintage Intel marked the first $250 million quarter, in 1983the year sales reached $1 billion for the first time.

1980s: From 286 to 486

During the 1974 recession, Intel was forced to lay off 30 percent of its employees, and morale declined substantially as a result. Thus, in 1981, when economic struggles again surfaced, instead of laying off more employees, Intel accelerated new product development with the 125 Percent Solution, which asked exempt employees to work two extra hours per day, without pay, for six months. A brief surge in sales the following year did not last, and, again, instead of more layoffs, Intel imposed pay cuts of up to ten percent. Such measures were not popular among all its workforce, but, by June 1983, all cuts had been restored and retroactive raises had been made. Moreover, in December 1982, IBM paid $250 million for a 12 percent share of Intel, giving the company not only a strong capital boost, but also strong ties to the undisputed industry leader. IBM would eventually increase its stake to 20 percent before selling its Intel stock in 1987.

Company Perspectives

The Internet revolution requires a wholesale reengineering of the infrastructure for commerce and communications. In five to eight years, we believe the world will be linked by one billion connected computers, through tens of millions of servers, generating trillions of dollars of e-commerce. As we shift our focus from a PC-dominated industry to an Internet-dominated economy, we are positioning ourselves to provide key technologies to help drive this transformation.

During the early 1980s, Intel began to slip in some of its markets. Fierce competition in DRAMs, static RAMs, and EPROMs left Intel concentrating on microprocessors. While competitors claimed that Intel simply gave away its DRAM market, Moore told Business Week in 1988 that the company deliberately focused on microprocessors as the least cyclical field in which to operate. Customer service, an area Intel had been able to overlook for years as it dominated its markets, became more important as highly efficient Japanese and other increasingly innovative competitors challenged Intels position. In addition, Intels manufacturing record, strained in years past by undercapacity, needed fixing. Fab 7, Intels seventh wafer-fabrication plant, opened in 1983 only to face two years of troubled operations before reaching full capacity. Between 1984 and 1988, Intel closed eight old plants, and in 1988 it spent some $450 million on new technology to bring its manufacturing capacity into line with its developmental prowess.

Despite these retrenchments, the company continued to excel in the microprocessor market. In 1982 Intel introduced its 80286 microprocessor, the chip that quickly came to dominate the upper-end PC market, when IBM came out with the 286-powered PC/AT. The 286 was followed in 1985 by Intels 80386 chip, popularized in 1987 by the Compaq DESKPRO 386, which, despite bugs when it first came out, became one of the most popular chips on the market. While the 286 brought to the personal computer a speed and power that gave larger computers their first real challenge, the 386 offered even greater speed and power together with the ability to run more than one program at a time. The 386 featured 32-bit architecture and 275,000 transistorsmore than twice the number of the 286.

In 1989 Intel introduced the 80486, a chip Business Week heralded as a veritable mainframe-on-a-chip. The 486 included 1.2 million transistors and the first built-in math coprocessor, and was 50 times faster than the 4004, the first microprocessor. In designing the i486, Intel resisted an industry trend toward RISC (reduced instruction-set computing), a chip design that eliminated rarely used instructions in order to gain speed. Intel argued that what RISC chips gained in speed they lost in flexibility and that, moreover, RISC chips were not compatible with software already on the market, which Intel felt would secure the 486s position. A new chip, the 64-bit i860 announced in early 1989, however, did make use of RISC technology to offer what Intel claimed would be a supercomputer on a chip.

Also in 1989, a major lawsuit that Intel had filed against NEC Corporation five years before was decided. Intel had claimed that NEC violated its copyright on the microcode, or embedded software instructions, of Intels 8086 and 8088 chips. Although Intel had licensed NEC to produce the microcode, NEC had subsequently designed a similar chip of its own. At issue was whether microcode could be copyrighted. The court ruled that it could but that NEC had not violated any copyright in the case at hand. The suit made public some issues surrounding Intels reputation. Some rivals and consumers, for example, claimed that Intel used its size and power to repress competition through such tactics as filing meritless lawsuits and tying microprocessor sales to other chips. Other observers, however, praised Intels protection of its intellectual property and, subsequently, its profits. The Federal Trade Commission conducted a two-year investigation of Intels practices and did not recom-mend criminal charges against the company, but two rival companiesAdvanced Micro Devices Inc. and Cyrix Corp.filed antitrust lawsuits against Intel in 1993.

1990s: The Pentium Decade

Intels annual net income topped $1 billion for the first time in 1992, following a very successful, brand-building marketing campaign. Intel ads aggressively sought to bolster consumer interest in and demand for computers that featured Intel In-side. By late 1993, the companys brand equity totaled $17.8 billionmore than three times its 1992 sales. Also during this time, Intel began to branch out from chipmaking. In 1992, the companys Intel Products Group introduced network, communications, and personal conferencing products for retail sale directly to PC users.

In 1993 Intel released its fifth-generation Pentium processor, a trademarked chip capable of executing over 100 million instructions per second (MIPS) and supporting, for example, real-time video communication. The Pentium processor, with its 3.1 million transistors, was up to five times more powerful than the 33-megahertz Intel 486 DX microprocessor (and 1,500 times the speed of the 4004), but, in an unusual marketing maneuver, the company suggested that all but the most demanding users would seek out PCs powered by the previous chip. The Pentiums reputation was initially sullied by the revelation of an embedded mathematical flaw, but Intel moved quickly to fix the problem.

Key Dates

1968:
Robert Noyce and Gordon Moore incorporate N M Electronics, which is soon renamed Intel Corporation.
1970:
Company develops DRAM, dynamic RAM.
1971:
Intel introduces the worlds first microprocessor and goes public.
1974:
Company introduces the first general purpose microprocessor.
1980:
IBM chooses the Intel microprocessor for the first personal computer.
1983:
Revenues exceed $1 billion for the first time.
1992:
Net income tops $1 billion for the first time.
1993:
The fifth generation chip, the Pentium, debuts.
1996:
Revenues surpass $20 billion, net income exceeds $5 billion.
1997:
Company introduces the Pentium II microprocessor.
1999:
Intel debuts the Pentium III and is added to the Dow Jones Industrial Average.
2000:
The first Intel 1-gigahertz processor hits the market.

The company enjoyed a dramatic 50 percent revenue in-crease in 1993, reaching $8.78 billion from $5.84 billion in 1992. Moreover, Intels net income leapt 115 percent to $2.3 billion, repudiating Wall Streets worries that competition had squeezed profit margins. While Intel faced strong competition both from chip makers such as giant Motorola, Inc.s PowerPC and former partner IBM, its place at the leading edge of technology was undisputed.

A key initiative that kept Intel ahead of its competitors was the companys move beyond chip design into computer design. With the advent of the Pentium, Intel began designing chipsets and motherboardsthe latter being the PC circuit board that combined a microprocessor and a chipset into the basic subsystem of a PC. With the company now selling the guts of a PC, dozens of computer manufacturers began making and selling Pentium-based machines.

In the mid-1990s, as sales of PCs accelerated and multimedia and the Internet were beginning to emerge, Intel continued developing ever more powerful microprocessors. In 1995 the Pentium Pro hit the market sporting 5.5 million transistors and capable of performing up to 300 MIPS. Intel next added MMX technology to its existing line of Pentium processors. MMX consisted of a new set of instructions that was designed specifically to improve the multimedia performance of personal computers. Fueled by exploding demand, revenues hit $20.85 bil-lion by 1996, while net income soared to $5.16 billion.

At this point Intel was continuing its longtime strategy of designing new, more powerful chips for the top end of the market while allowing previous-generation microprocessors to migrate down to the lower segments of the market. With the introduction of the Pentium II in May 1997, however, the company adopted a new strategy of developing a range of microprocessors for every segment of the computing market. The Pentium II, with 7.5 transistors, debuted with a top-end model that clocked at 300 MHZ. Originally designed for highend desktop PCs, the Pentium II was soon adapted for use in notebook and laptop computers. With the following year came the launch of the Celeron processor, which was designed specifically for the value PC desktop sector, a rapidly growing segment of the market ever since the early 1997 debut of a sub$1,000 PC from Compaq. Also in 1998 Intel for the first time designed a microprocessorthe Pentium II Xeonespecially for midrange and higher-end servers and workstations. At the same time Intel was moving into another burgeoning sector, that of embedded control chips for networking and other applications, such as digital set-top boxes.

Meanwhile Intel settled a dispute with Digital Equipment Corporation (DEC) over the development of the Pentium chip by acquiring DECs semiconductor operations. In May 1997 Craig R. Barrett was named president of Intel, having joined the company in 1974, serving as head of manufacturing starting in 1985, and being named chief operating officer in 1993. Grove remained chairman and CEO for one year, whereupon Barrett was named president and CEO, with Grove retaining the chairmanship. In early 1999 Intel reached a settlement with the Federal Trade Commission on an antitrust suit, thereby avoiding the protracted litigation and negative publicity that beset its Wintel partner, Microsoft, in the late 1990s. Reflecting the increasing importance of technology to the U.S. economy, Intel was added to the Dow Jones Industrial Average in November 1999.

During the late 1990s Intel made several strategic acquisitions that rapidly gave the company a significant presence in areas outside its microprocessor core: wireless communications products, such as flash memory for mobile phones and two-way pagers; networking building blocks, such as hubs, switches, and routers; and embedded control chips for laser printers, storage media, and automotive systems. Intel also entered the market for e-commerce services, rapidly building up the largest business-to-business e-commerce site in the world, with $1 billion per month in online sales by mid-1999. The company was not neglecting its core, however; in 1999 Intel had its largest micro-processor launch ever with the simultaneous introduction of 15 Pentium III and Pentium III Xeon processors. In early 2000 a one-gigahertz Pentium III chip hit the market. Later in 2000 came the debut of the next generation processor for the early 21st century, the Itanium, the companys first 64-bit processor, which was initially designed to meet the needs of powerful Internet servers. With its continuing development of ever more powerful processors and its aggressive expansion into other key technology areas, Intel appeared certain to remain one of the linchpins of the information economy in the new millennium.

Principal Subsidiaries

Componentes Intel de Costa Rica, S.A.; DSP Communications, Inc.; Dialogic Corporation; Intel Commodities Limited (Cayman); Intel Corporation (UK) Limited; Intel Electronics Limited (Israel); Intel International BV (Netherlands); Intel Ireland Limited (Cayman); Intel Kabushiki Kaisha (Japan); Intel Massachusetts, Inc.; Intel Overseas Corporation; Intel Products (M) Sdn. Bhd. (Malaysia); Intel Puerto Rico, Inc; Intel Semiconductor Limited; Intel Technology Phils, Inc. (Philippines); Intel Technology Sdn. Berhad (Malaysia); IPivot, Inc.; Level One Communications, Inc.; Mission College Investments Limited (Cayman).

Principal Operating Units

Intel Architecture Business Group; Wireless Communications and Computing Group; Communications Products Group; Net-work Communications Group; New Business Group.

Principal Competitors

Acer Inc.; Advanced Micro Devices, Inc.; Atmel Corporation; Cisco Systems, Inc.; Electronic Data Systems Corporation; Exodus Communications, Inc.; Fujitsu Limited; Harris Corporation; Hitachi, Ltd.; International Business Machines Corporation; Integrated Device Technology, Inc.; Lucent Technologies Inc.; Macronix International Co., Ltd.; Microchip Technology Incorporated; Mitsubishi Electric Industrial Co., Ltd.; Motorola, Inc.; National Semiconductor Corporation; NEC Corporation; Nortel Networks Corporation; Koninklijke Philips Electronics N.V.; Samsung Electronics Co., Ltd.; Sharp Corporation; STMicroelectronics N.V.; Sun Microsystems, Inc.; Texas Instruments Incorporated; 3Com Corporation; Toshiba Corporation; Transmeta Corporation; VIA Technologies, Inc.

Further Reading

Brandt, Richard, Otis Port, and Robert D. Hof, Intel: The Next Revolution, Business Week, September 26, 1988, p. 74.

Bylinsky, Gene, Intels Biggest Shrinking Job Yet, Fortune, May 3, 1982, pp. 250 +.

Clark, Tim, Inside Intels Marketing Machine, Business Marketing, October 1992, pp. 1419.

Corcoran, Elizabeth, Reinventing Intel, Forbes, May 3, 1999, pp. 15459.

Defining Intel: 25 Years/25 Events, Santa Clara: Intel Corporation, 1993.

Garland, Susan B., and Andy Reinhardt, Making Antitrust Fit High Tech, Business Week, March 22, 1999, p. 34.

Gottlieb, Carrie, Intels Plan for Staying on Top, Fortune, March 27, 1989, pp. 98 +.

Hof, Robert D., Larry Armstrong, and Gary Me Williams, Intel Un-bound, Business Week, October 9, 1995, pp. 148+.

Is the Semiconductor Boom Too Much of a Good Thing for Intel?, Business Week, April 23, 1984, pp. 114 +.

Jackson, Tim, Inside Intel: Andy Grove and the Rise of the Worlds Most Powerful Chip Company, New York: Button, 1997, 424 p.

Kirkpatrick, David, Intel Goes for Broke, Fortune, May 16, 1994, pp. 6266, 68.

______, Intels Amazing Profit Machine, Fortune, February 17, 1997, pp. 60 +.

______, Mr. Grove Goes to China, Fortune, August 17, 1998, pp. 15461.

Palmer, Jay, Zero Hour, Barrons October 4, 1999, pp. 3334, 36.

A Revolution in Progress: A History of Intel to Date, Santa Clara, Calif.: Intel Corporation, 1984.

Reinhardt, Andy, The New Intel: Craig Barrett Is Leading the Chip Giant into Riskier Terrain, Business Week, March 13, 2000, pp. 110 +.

______, Who Says Intels Chips Are Down?, Business Week, December 7, 1998, p. 103.

Reinhardt, Andy, Ira Sager, and Peter Burrows, Intel: Can Andy Grove Keep Profits Up in an Era of Cheap PCs?, Business Week, December 22, 1997, pp. 7174, 7677.

Ristelhueber, Robert, Intel: The Company People Love to Hate, Electronic Business Buyer, September 1993, pp. 5867.

Wilson, John W., Intel Wakes Up to a Whole New Marketplace in Chips, Business Week, September 2, 1985, pp. 73 +.

Yu, Albeit, Creating the Digital Future: The Secrets of Consistent Innovation at Intel, New York: Free Press, 1998, 214 p.

April Dougal Gasbarre

updated by David E. Salamie

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Intel Corporation

Intel Corporation

2200 Mission College Blvd.
P.O. Box 58119
Santa Clara, California 95052-8119
U.S.A.
(408) 765-8080
Fax: (408) 765-1402

Public Company
Incorporated: 1968 as N M Electronics
Employees: 29,500
Sales: $8.87 billion
Stock Exchanges: New York NASDAQ
SICs: 3674 Semiconductors and Related Devices; 3577 Computer Peripheral Equipment, Nee.; 7372 Prepackaged Software; 3571 Electronic Computers

Intel Corporation is the largest semiconductor manufacturer in the world, with major facilities in the United States, Europe, and Asia. Intel has changed the world dramatically since it was founded in 1968; the company invented the microprocessor, the computer on a chip that made possible the first handheld calculators and personal computers. By the early 1990s, Intels product line included: microcontrollers, memory chips, computer modules, and boards for original equipment manufacturers; network, communications and personal conferencing products for retail sale; and high-performance parallel supercomputers. Intel remained competitive through a combination of clever marketing, well-supported research and development, a vital corporate culture, and legal proficiency. In 1993, the market research firm Dataquest estimated Intels chip sales at almost 30 percent higher than those of its closest competitor.

Intels founders, Robert Noyce and Gordon Moore, were among the eight founders of Fairchild Semiconductor, established in 1957. While at Fairchild, Noyce and Moore invented the integrated circuit, and, in 1968, they decided to form their own company. They were soon joined by Andrew Grove, a Hungarian refugee who had arrived in America in 1956 and joined Fairchild in 1963. Grove would remain president and CEO of Intel into the 1990s.

To obtain start-up capital, Noyce and Moore approached Arthur Rock, a venture capitalist, with a one-page business plan simply stating their intention of developing large-scale integrated circuits. Rock, who had helped start Fairchild Semiconductor, as well as Teledyne and Scientific Data Systems, had confidence in Noyce and Moore and provided $3 million in capital. The company was incorporated on July 18, 1968 as N M Electronics (the letters standing for Noyce Moore), but quickly changed its name to Intel, formed from the first syllables of integrated electronics. Intel gathered another $2 million in capital before going public in 1971.

Noyce and Moores scanty business proposal belied a clear plan to produce large-scale integrated (LSI) semiconductor memories. At that time, semiconductor memories were ten times more expensive than standard magnetic core memories. However, costs were falling, and Intels founders felt that with the greater speed and efficiency of LSI technology, semiconductors would soon replace magnetic cores. Within a few months of its startup, Intel produced the 3101 Schottky bipolar memory, a high-speed random access memory (RAM). The 3101 proved popular enough to sustain the company until the 1101, a metal oxide semiconductor (MOS) chip, was perfected and introduced in 1969. The following year, Intel introduced the 1103, a 1 Kilobyte (K) dynamic RAM, or DRAM, which was the first chip large enough to store a significant amount of information. With the 1103, Intel finally had a chip that really did begin to replace magnetic cores; DRAMs eventually proved indispensable to the personal computer.

The companys most dramatic impact on the computer industry involved its 1971 introduction of the 4004, the worlds first microprocessor. Like many of Intels innovations, the microprocessor was a byproduct of efforts to develop another technology. When a Japanese calculator manufacturer asked Intel to design cost-effective chips for a series of calculators, Intel engineer Ted Hoff was assigned to the project; during his search for such a design, Hoff conceived a plan for a central processing unit (CPU) on one chip. The 4004, which crammed 2,300 transistors onto a one-eighth- by one-sixth-inch chip, had the power of the old 3,000-cubic-foot ENIAC computer, which depended on 38,000 vacuum tubes.

Although Intel initially focused on the microprocessor as a computer enhancement that would allow users to add more memory to their units, the microprocessors great potential for everything from calculators to cash registers and traffic lightssoon became clear. Their applications were facilitated by Intels introduction of the 8008, an 8-bit microprocessor developed along with the 4004 but oriented toward data and character (rather than arithmetic) manipulation. The 8080, introduced in 1974, was the first truly general purpose microprocessor. For $360, Intel sold a whole computer on one chip, while conventional computers sold for thousands of dollars. The response was overwhelming. The 8080 soon became the industry standard and Intel the industry leader in the 8-bit market.

In response to ensuing competition in the manufacture of 8-bit microprocessors, Intel introduced the 8085, a faster chip with more functions. The company was also developing two more advanced projects, the 32-bit 432 and the 16-bit 8086. The 8086 was introduced in 1978 but took two years to achieve wide use, and, during this time, Motorola produced a competing chip (the 68000) that seemed to be selling faster. Intel responded with a massive sales effort to establish its architecture as the standard.

When IBM chose the 8008, the 8086s 8-bit cousin, for its personal computer in 1980, Intel seemed to have beat out the competition.

During the 1970s, Intel had also developed the erasable programmable read-only memory (EPROM), another revolutionary but unintended research byproduct. Intel physicist Dov Frohman was working on the reliability problems of the silicon gate used in the MOS process when he realized that the disconnected, or floating, gates that were causing malfunctions could be used to create a chip that was erasable and reprogrammable. Since conventional ROM chips had to be permanently programmed during manufacture, any change required the manufacture of a whole new chip. With EPROM, however, Intel could offer customers chips that could be erased and repro-grammed with ultraviolet light and electricity. At its introduction in 1971, EPROM was a novelty without much of a market. But the microprocessor, invented at the same time, created a demand for memory; the EPROM offered memory that could be conveniently used to test microprocessors.

Another major development at Intel during this time was that of peripheral controller chips. Streamlined for specific tasks and stripped of unneeded functions, peripheral chips could greatly increase a computers abilities without raising software development costs. One of Intels most important developments in peripherals was the coprocessor, first introduced in 1980. Coprocessor chips were an extension of the CPU that could handle specific computer-intensive tasks more efficiently than the CPU itself. Once again, innovation kept Intel ahead of its competition.

Intels rapid growth, from the 12 employees at its founding in 1968 to 15,000 in 1980, demanded a careful approach to corporate culture. Noyce, Moore, and Grove, who remembered their frustration with Fairchilds bureaucratic bottlenecks, found that defining a workable management style was important. Informal weekly lunches with employees kept communication lines open while the company was small, but that system had become unwieldy. Thus, the founders installed a carefully outlined program emphasizing openness, decision making on the lowest levels, discipline, and problem solving rather than paper shuffling. Moreover, the companys top executives eschewed such luxuries as limousines, expense account lunches, and private parking spaces to establish a sense of teamwork with their subordinates.

In an interview with the Harvard Business Review in 1980, Noyce remarked on the companys hiring policy, stating, we expect people to work hard. We expect them to be here when they are committed to be here; we measure absolutely everything that we can in terms of performance. Employee incentives included options on Intel stock, and technological breakthroughs were celebrated with custom-bottled champagne Vintage Intel marked the first $250 million quarter, in 1983the year sales reached $1 billion for the first time.

During the 1974 recession, Intel was forced to lay off 30 percent of its employees, and morale declined substantially as a result. Thus, in 1981, when economic struggles again surfaced, instead of laying off more employees, Intel accelerated new product development with the 125 Percent Solution, which asked exempt employees to work two extra hours per day, without pay, for six months. A brief surge in sales the following year didnt last, and, again, instead of more lay offs, Intel imposed pay cuts of up to ten percent. Such measures werent popular among all its work force, but, by June 1983, all cuts had been restored and retroactive raises had been made. Moreover, in December 1982, IBM paid $250 million for a 12 percent share of Intel, giving the company not only a strong capital boost, but also strong ties to the undisputed industry leader. IBM would eventually increased its stake to 20 percent before selling its Intel stock in 1987.

During the early 1980s, Intel began to slip in some of its markets. Fierce competition in DRAMS, static RAMS, and EPROMS left Intel concentrating on microprocessors. While competitors claimed that Intel simply gave away its DRAM market, Moore told Business Week in 1988 that the company deliberately focused on microprocessors as the least cyclical field in which to operate. Customer service, an area Intel had been able to overlook for years as it dominated its markets, became more important as highly-efficient Japanese and other increasingly innovative competitors challenged Intels position. In addition, Intels manufacturing record, strained in years past by undercapacity, needed fixing. Fab 7, Intels seventh wafer-fabrication plant, opened in 1983 only to face two years of troubled operations before reaching full capacity. Between 1984 and 1988, Intel closed eight old plants, and in 1988 it spent some $450 million on new technology to bring its manufacturing capacity into line with its developmental prowess.

Despite these retrenchments, the company continued to excel in the microprocessor market. In 1982, Intel introduced its 80286 microprocessor, the chip that quickly came to dominate the upper-end PC market, when IBM came out with the 286-pow-ered PC/AT. The 286 was followed in 1985 by Intels 80386 chip, popularized in 1987 by the Compaq 386, which, despite bugs when it first came out, became one of the most popular chips on the market. While the 286 brought to the personal computer a speed and power that gave larger computers their first real challenge, the 386 offered even greater speed and power together with the ability to run more than one program at a time.

In 1989, Intel introduced the 80486, a chip Business Week heralded as a veritable mainframe-on-a-chip. In designing the i486, Intel resisted an industry trend toward RISC (reduced instruction-set computing), a chip design that eliminated rarely used instructions in order to gain speed. Intel argued that what RISC chips gained in speed they lost in flexibility and that, moreover, RISC chips were not compatible with software already on the market, which Intel felt would secure the 486s position. However, a new chip, the 64-bit i860 announced in early 1989, did make use of RISC technology to offer what Intel claimed would be a supercomputer on a chip.

Also in 1989, an important lawsuit that Intel had filed against NEC Corporation five years before was decided. Intel had claimed that NEC violated its copyright on the microcode, or embedded software instructions, of Intels 8086 and 8088 chips. Although Intel had licensed NEC to produce the microcode, NEC had subsequently designed a similar chip of its own. At issue was whether microcode could be copyrighted. The court ruled that it could but that NEC had not violated any copyright in the case at hand. The suit made public some issues surrounding Intels reputation. Some rivals and consumers, for example, claimed that Intel used its size and power to repress competition through such tactics as filing meritless lawsuits and tying microprocessor sales to other chips. Other observers, however, praised Intels protection of its intellectual property and, subsequently, its profits. The Federal Trade Commission conducted a two-year investigation of Intels practices and did not recommend criminal charges against the company, but two rival companiesAdvanced Micro Devices Inc. and Cyrix Corp.filed antitrust lawsuits against Intel in 1993.

Intels annual net income topped $1 billion for the first time in 1992, following a very successful, brand-building, marketing campaign. Intel ads aggressively sought to bolster consumer interest in and demand for computers that featured Intel Inside. By late 1993, the companys brand equity totaled $17.8 billionmore than three times its 1992 sales. Also during this time, Intel began to branch out from chipmaking. In 1992, the companys Intel Products Group introduced network, communications, and personal conferencing products for retail sale directly to PC users.

In 1993, Intel released its fifth-generation Pentium processor, a trademarked chip capable of executing over 100 million instructions per second and supporting, for example, real-time video communication. The Pentium processor was up to five times more powerful than the 33-megahertz Intel 486 DX microprocessor, but, in an unusual marketing maneuver, the company suggested that all but the most demanding users seek out PCs powered by the previous chip.

The company enjoyed a dramatic 50 percent revenue increase in 1993, reaching $8.78 billion from $5.84 billion in 1992. Moreover, Intels net income leaped 115 percent to $2.3 billion, repudiating Wall Streets worries that competition had squeezed profit margins. While Intel faced strong competition both from chip makers like giant Motorolas PowerPC and former partner IBM, its place at the leading edge of technology was undisputed and expected to continue. As it entered the mid-1990s, Intel looked to address potential challenges in the form of leadership transitions, as founders Moore and Grove neared retirement.

Principal Subsidiaries:

Intel Japan K.K.; Intel Corporation S.A.R.L. (France); Intel Corporation (U.K.) Ltd.; Intel GmbH (Germany); Intel Semiconductor, Ltd. (Hong Kong); Intel Semiconductor of Canada, Ltd.

Further Reading:

Clark, Tim, Inside Intels Marketing Machine, Business Marketing, October 1992, pp. 14-19.

Defining Intel: 25 Years/25 Events, Santa Clara: Intel Corporation, 1993.

A Revolution in Progress... A History of Intel to Date, Santa Clara: Intel Corporation, 1984.

Ristelhueber, Robert, Intel: The Company People Love to Hate, Electronic Business Buyer, September 1993, pp. 58-67.

updated by April Dougal Gasbarre

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Intel Corporation

Intel Corporation

3065 Bowers Avenue
Santa Clara, California 95051
U.S.A.
(408) 765-1435

Public Company
Incorporated: 1968 as N M Electronics
Employees: 20,800
Sales: $2.9 billion
Stock Index: New York NASDAQ

Intel has changed the world dramatically since it was founded in 1968: the company invented the microprocessor, the computer on a chip that has made everything from the first handheld calculator to todays powerful personal computers possible.

Intels founders, Robert Noyce and Gordon Moore, were among the eight founders of Fairchild Semiconductor in 1957. Noyce is the co-inventor of the integrated circuit, and Moore made some of the basic discoveries that led to it. In 1968 the two men, feeling frustrated by Fairchilds size, decided to leave to form their own company. They were joined soon after by Andrew Grove, who had been at Fairchild since 1963 and is president and CEO of Intel today.

Noyce and Moore asked Arthur Rock, a venture capitalist who had helped start Fairchild Semiconductor as well as Teledyne and Scientific Data Systems, for help in raising the money to start their company. With a one-page business plan saying simply that they were going into large-scale integrated circuits, they soon had $3 million in capital. The company was incorporated on July 18, 1968 as N M Electronics (for Noyce Moore), but quickly changed its name to Intel, from the first syllables of integrated electronics. Intel gathered another $2 million in capital before going public in 1971.

Despite their scanty business outline, Noyce and Moore had a clear plan for their company. They planned to produce large-scale integrated (LSI) semiconductor memories. At that time, semiconductor memories were ten times more expensive than standard magnetic core memories. But costs were dropping, and Intels founders felt that with the greater speed and efficiency of LSI technology, semiconductors would soon replace magnetic cores.

Within a few months of its startup, Intel was able to produce the 3101 Schottky bipolar memory, a high-speed random access memory (RAM). The 3101 proved popular enough to sustain the company until the 1101, a metal oxide semiconductor (MOS) chip, was perfected and introduced in 1969.

Intels next product was the 1103, introduced in 1970: a IK dynamic RAM, or DRAM, it was the first chip large enough to store a significant amount of information; today DRAMs are indispensable to every computer. With the 1103, Intel finally had a chip that really did begin to replace magnetic cores.

But the companys most dramatic impact on the computer industry didnt come until the introduction of the 4004, the worlds first microprocessor. Like many of Intels innovations, the microprocessor was the by-product of a search for something else. When a Japanese calculator manufacturer asked Intel to design the chips for a series of calculators, an engineer named Ted Hoff was assigned to the project. In his search for cost-effectiveness, he eventually conceived a plan for a central processing unit (CPU) on one chip. The 4004, which crammed 2,300 transistors onto a one-eighth- by one-sixth-inch chip, had the power of the old 3,000-cubic-foot ENIAC computer, which depended on 38,000 vacuum tubes. The microprocessor was born.

Although at first Intel saw the new device as a way to sell more memory, it was soon clear that the microprocessor held great potential for everything from calculators to cash registers and traffic lights. With the 1972 introduction of the 8008, an 8-bit microprocessor developed along with the 4004 but oriented toward data and character (rather than arithmetic) manipulation, microprocessors were off and running. The 8080, introduced in 1974, was the first truly general-purpose microprocessor. For $360, Intel sold a whole computer, on one chip, when real computers cost thousands of dollars. The response was overwhelming. The 8080 soon became the industry standard and Intel the industry leader in the 8-bit market.

Competitors began to produce 8-bit microprocessors quickly, however. Intel responded with the 8085, a faster chip with more functions. Meanwhile, the company was working on two more advanced projects, the 32-bit 432 and the 16-bit 8086. The 8086 was introduced in 1978, but it took two years for it to catch on. In that time, Motorola produced a competing chip (the 68000) that seemed to catch on faster. Intel responded with a massive sales effort to establish its architecture as the standard. When, among other things, IBM chose the 8088, the 8086s 8-bit cousin, for its personal computer in 1980, Intels battle over architecture was won.

In the meantime, in 1971 Intel had also developed the erasable programmable read-only memory (EPROM), another revolutionary but unintended research by-product. An Intel physicist named Dov Frohman was working on the reliability problems of the silicon gate used in the MOS process when he realized that the disconnected, or floating, gates that were causing malfunctions could be used to create a chip that was erasable and reprogrammable.

Standard ROM chips had to be permanently programmed during manufacture; to make a change you had to manufacture a whole new chip. With EPROM, Intel could offer customers chips which could be erased and reprogrammed with ultraviolet light and electricity. At its introduction in 1971, EPROM was a novelty without much of a market. But the microprocessor, invented at the same time, created a demand for memory; the EPROM offered memory that could be conveniently used to test microprocessors. It was a match made in heaven.

Another major development at Intel during the 1970s was peripheral controller chips. Streamlined for specific tasks and stripped of unneeded functions, peripheral chips could greatly increase a computers abilities without raising software-development costs. One of Intels most important developments in peripherals was the co-processor, first introduced in 1980. Co-processor chips are an extension of the CPU that can handle specific computer-intensive tasks more efficiently than the CPU itself. Once again, innovation kept Intel ahead of its competition.

Intels rapid growth, from the 12 employees at its founding in 1968 to 15,000 in 1980, demanded a careful approach to corporate culture. Since Noyce, Moore, and Grove had left Fairchild because its size had created frustrating bureaucratic bottlenecks, defining a workable management style was important to Intels founders. Informal weekly lunches with employees kept communication lines open while the company was small, but the system didnt last for long. Instead, a carefully outlined program emphasizing openness, decision making on the lowest levels, discipline, and problem solving rather than paper shuffling has preserved Intels remarkable ability to innovate. Intel makes no bones about the kind of employees it looks for. In an interview with the Harvard Business Review in 1980 Noyce said, we expect people to work hard. We expect them to be here when they are committed to be here; we measure absolutely everything that we can in terms of performance. Until recently employees who arrived after 8:10 a.m. signed a late list. But this strict attitude is balanced by company commitment. Incentives include options on Intel stock and breakthroughs are celebrated with custom-bottled champagne (Vintage Intel marked the first $250 million quarter, in 1983the year sales reached $1 billion for the first time).

During the 1974 recession, when Intel laid off 30% of its employees, the experience was traumatic enough that when 1981 rolled around, instead of laying off workers, Intel accelerated new product development with the 125% Solution (asking exempt employees to work two extra hours a day, without pay, for six months), hoping to fight its way through the recession poised to tackle the next upturn. When a brief surge in sales in 1982 didnt last, again, instead of firing, Intel imposed pay cuts of up to 10%. Such measures werent universally popular, but by June, 1983 all cuts had been restored and retroactive raises had been made. And in December, 1982 IBM paid $250 million for a 12% share of Intel, giving the company not only a strong capital boost, but also strong ties to the undisputed industry leader (IBM eventually increased its stake to 20% before selling its Intel stock in 1987).

During the early 1980s, Intel began to slip in some of its markets. Fierce competition in DRAMS, static RAMS, and EPROMS left Intel concentrating on microprocessors. While competitors claimed that Intel simply gave away its DRAM market, Moore told Business Week in 1988 that his company chose microprocessors as the field with the most promise.

The company also struggled during the mid-1980s to overcome its reputation for arrogance in marketing. Customer service, an area Intel had been able to overlook for years as it dominated its markets, became more important as the highly-efficient Japanese and other increasingly innovative competitors challenged Intels position. In addition, Intels manufacturing record, strained in years past by undercapacity, needed fixing. Fab 7, Intels seventh wafer-fabrication plant, opened in 1983 only to face two years of troubled operations before reaching full capacity. Between 1984 and 1988, Intel closed eight old plants, and in 1988 it spent some $450 million on new technology to bring its manufacturing capacity into line with its developmental prowess.

But in the microprocessor market, Intel continued to excel. In 1982, Intel introduced its 80286 microprocessor, the chip that, when IBM came out with the 286-powered PC/AT, quickly came to dominate the upper-end PC market. The 286 was followed in 1985 by Intels 80386 chip, popularized in 1987 by the Compaq 386, which, despite bugs when it first came out, is one of the most popular chips on the market today. While the 286 brought to the PC a speed and power that gave larger computers their first real challenge, the 386 offered even greater speed and power together with the ability to run more than one program at a time. And in 1989 Intel introduced the 80486, a chip Business Week heralded as a veritable mainframe-on-a-chip.

In designing the i486, Intel resisted an industry trend toward RISC (reduced instruction-set computing), a way of designing chips that eliminates rarely used instructions to gain speed. Intel argued that what RISC chips gained in speed they lost in flexibilityand the ability to run the software already on the market, something Intel feels will secure the 486s position despite whatever speed competitors can offer through non-compatible RISC chips. But a new chip, the 64-bit i860 announced in early 1989, does make use of RISC technology to offer what Intel has claimed will be a supercomputer on a chip.

Also in 1989 an important lawsuit Intel had filed against NEC in 1984 was decided. Intel had claimed that NEC violated its copyright on the microcode, or embedded software instructions, of Intels 8086 and 8088 chips, which Intel had licensed NEC to produce, when NEC designed a similar chip of its own. At issue was whether microcode could even be copyrighted. The court ruled that it could bebut that NEC had not violated any copyright in the case at hand.

While Intel faces strong competition both from domestic chipmakers like the giant Motorola and the smaller Sun Microsystems and MIPS Computer Systems, its place at the edge of technology is undisputed. Meanwhile, it has also begun to branch out from chipmaking. The company has begun to build computers of its own, including a parallel processing one. It also has a growing systems business, providing customers with everything they need to build computer systems of their own.

Indeed, it is not technology, but more mundane matters like manufacturing, marketing, and management that are likely to pose challenges for Intel in the 1990s. All three of the companys founders will be looking toward retirement in the next few years, and how the company handles its first leadership transition may make as much difference to its future as the speed of its next chip.

Principal Subsidiaries:

Intel Electronics Ltd. (Israel); Intel International; Intel Investment Ltd. (Cayman Islands); Intel Japan K.K.; Intel Puerto Rico, Inc.; Intel Singapore Ltd.; Intel Overseas Corporation.

Further Reading:

A Revolution in Progress... A History of Intel to Date, Santa Clara, Intel Corporation, 1984.

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Intel Corporation

Intel Corporation

The Intel Corporation of Santa Clara, California, was founded in 1968 by Robert Noyce (19271990), co-inventor of the integrated circuit , and his colleague Gordon Moore (1929), the originator of "Moore's law." The name Intel was a shortened form of Integrated Electronics. Noyce and Moore were joined by Andy Grove and the three, all formerly from Fairchild Semiconductor, led the firm on its initial mission to produce the world's first semiconductor-based memory chips. The company went on to commercialize the microprocessor, the product that Intel is best known for today.

In 1969 a Japanese manufacturer, Busicom, commissioned Intel engineers to design a set of a dozen custom chips for its new family of scientific calculators. At the time, all logic chips were custom-designed for each customer's product. Logic chips perform calculations and execute programs, unlike memory chips, which store instructions and data.

Intel engineer Marcian "Ted" Hoff improved on Busicom's idea. Instead of designing twelve custom chips, he recommended a set of only four chips for logic and memory, which featured a central processing unit. Although Busicom was satisfied with this alternative approach, Hoff realized its full potentialthe design team had created the first general-purpose microprocessor chip, though the term "microprocessor" would not appear for many years.

But, there was a problem. Intel did not own the rights to the new technologyBusicom did. Hoff urged company officials to buy the design from its former client. But others in the company claimed that Intel's future lay in fast and inexpensive memory chips, not in logic chips. Eventually, Hoff's side won by arguing that the success of the new logic chips would enhance the market for memory chips.

Busicom, strapped for cash, agreed to sell the rights for the four-chip set for $60,000. Intel used that agreement as the basis for its microprocessor business, eventually becoming a powerful global corporation. Sales in 2000 reached $33.7 billion.

In 1971, armed with its new technology, Intel engineers introduced the model 4004 microprocessor, which sold for $200 and could perform 60,000 operations per second. It was the size of a thumbnail, featured 2,300 transistors on a sliver of silicon , and could deliver the same amount of computing power as the first electronic computer, ENIAC. In 1972 the model 8008 microprocessor featured 3,500 transistors. Although that was powerful at the time, it was primitive compared to the Pentium IV processor offered in 2000, which had 42 million transistors.

A series of chips followed, each more powerful than the previous one. By 1981 Intel's 16-bit 8086 and 8-bit 8088 processors took the design world by storm, winning an unprecedented 2,500 design awards in a single year. That year, IBM selected the Intel 8088 microprocessor to run its first desktop personal computer, the IBM-PC.

The significance of the IBM alliance was not immediately evident. An Intel sales engineer who worked on the IBM project said, "At the time, a great account was one that generated 10,000 units a year. Nobody comprehended the scale of the PC business would grow to tens of millions of units every year." The success of the IBM-PC helped change the company's direction. In 1986 Intel left the memory-chip market to focus on microprocessors and, under the leadership of Andy Grove who succeeded Moore as CEO in 1987, the company became the world's dominant supplier of microprocessors.

Moore's law, which predicts ever-more complex circuits, drives Intel's designers. By constantly reducing the size of transistors within chips, Intel has reduced their cost. Smaller chips are cheaper because more of them can be made from a single expensive silicon wafer. There are additional benefits. Smaller chips work faster, system reliability is increased, and power requirements are reduced.

To make these tiny chips successfully, Intel's manufacturing technology has had to improve constantly. The earliest chips were made by workers wearing smocks. In 2001 microprocessors are created in a sterile environment, called cleanrooms, which are thousands of times cleaner than those of twenty-five years ago. Robots move the silicon wafers from process to process. Operators working in these cleanrooms wear non-linting, anti-static fabric, called bunny suits, with face masks, safety glasses, gloves, shoe coverings, and even special breathing equipment.

As Intel grew to become the world's largest chipmaker, its dominant market share did not go unnoticed by competitors and the federal government. In 1998 the Federal Trade Commission announced an investigation into allegations of anti-competitive business practices. The company cooperated fully during the nine-month inquiry. The case was settled before it went to court.

Intel continues to explore possible barriers to microprocessor design. In 2000 company engineers demonstrated a 0.13-micron process technology using an ultra tiny transistor gate and the thinnest of thin films. In time, this advance will allow the company to manufacture chips with transistors that are approximately 1/1000th the width of a human hair.

Time magazine named Intel CEO Andy Grove, a Hungarian immigrant born Adras Gróf, as its 1997 Man of the Year as "the person most responsible for the amazing growth in the power and innovative potential of microchips."

see also Apple Computer, Inc.; Bell Labs; Integrated Circuits; Microchip; Microcomputers; Microsoft Corporation.

Ann McIver McHoes

Bibliography

Jackson, Tim. Inside Intel, Andy Grove and the Rise of the World's Most Powerful Chip Company. New York: Dutton, 1997.

Ramo, Joshua. "Man of the Year: Andrew W. GroveA Survivor's Tale." Time, December 29, 1997: 54.

Yu, Albert. Creating the Digital Future. New York: Free Press, 1998.

Internet Resources

Intel Homepage. <http://www.intel.com>

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Intel

Intel A US corporation that is a leading manufacturer of integrated circuits (chips), particularly noted for its important range of microprocessor chips. The current range is shown in the table. The Pentium processor, Intel's most highly integrated semiconductor device, together with the previous generations – the Intel486 and Intel386 processors – run most current operating systems and support leading graphical user interfaces. In the Intel486 and Intel386 range, the standard DX suffix is replaced by SX to denote a lower-performance CPU without a built-in mathematics coprocessor, while the SL suffix is for a variant with low power consumption for mobile computers. The DX2 and DX4 ranges have doubled and tripled internal clock speeds respectively. The clock rates indicated (June 1995) are undergoing frequent upward modification.

All Intel486 and Intel386 processors are informally known by the numbers alone, and all used to have an 80 prefix. For instance, 386, 80386, Intel386 (Trademark), and i386 (Trademark) are synonymous. Preceding the 80386 range were the 80286, the 8086, and the 8088. Processors from the 8086 to the i486SX have optional math coprocessors distinguished by having a 7 in their number instead of a 6; hence the i387, i487.

Intel was the first manufacturer of microprocessors with the 4004 and 8008 chip sets. The original IBM PC and its successors and clones all used Intel processors or copies of them. In addition to its processor chips, Intel also sells system products, including both board-level products and the Paragon range of supercomputers. It is ranked number 41 in terms of revenue in the list of the world's top IT suppliers (1993 figures).

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Intel Corporation

Intel Corporation

founded: 1968

Contact Information:

headquarters: 220 mission college blvd.
santa clara, ca 95052-8119 phone: (408)765-8080 fax: (408)765-6284 email: [email protected] url: http://www.intel.com

OVERVIEW

Intel Corp. is a manufacturer of microprocessors, chipsets and motherboards, microprocessor peripherals, microcomputers and supercomputers, and semiconductors, including flash memory devices, best known for its "Intel Inside" advertising slogan designed to push its Pentium processors for personal computers. In mid-1997 it was estimated that Intel microprocessors were in more than 80 percent of all personal computers.


COMPANY FINANCES

The first quarter of 1998 showed a 7-percent drop in revenues when compared to the same quarter in 1997, from $6.4 to $6.0 billion. During most of 1997, sales were strong, bringing in a revenue of $25.1 billion, compared to 1996's total of $20.8 billion. At the end of 1997 and beginning of 1998, sales slowed and the company purchased Chips and Technologies, Inc., reducing revenue and Intel's stock value. By mid-1998, stock had risen to the mid-70s, after the company repurchased 22.1 million shares.

Over the years, revenue has consistently risen—from $8.8 billion in 1993, to $11.5 billion in 1994, to $16.2 billion in 1995. In addition, Intel's stock has also risen with earning per share ranging from $1.30 in 1993 to $3.87 in 1997.


ANALYSTS' OPINIONS

In June 1998, shortly after the U.S. Department of Justice accused Microsoft of monopoly, the Federal Trade Commission (FTC) filed a complaint against Intel, charging that it had denied three of its customers access to information they needed to design and build systems using Intel's latest technology. The FTC said that Intel had done this because those companies refused to give Intel licenses to their patents. In a story published by US News Online, reporters William J. Cook and Warren Cohen said the FTC characterized Intel as "a schoolyard bully who illegally takes the ball away from anyone who won't play by his unilaterally imposed rules." A federal appeals court lifted the injunction on Microsoft, an action that is expected to bode well for its partner Intel, as well.

HISTORY

Intel Corporation was the creation of a couple of engineers who had left Fairchild Semiconductor in 1968 in an entrepreneurial desire to develop large scale integration technology for silicon-based chips. Robert Noyce had been the co-inventor of the integrated circuit while Gordon Moore was primarily responsible for the company's planning, and developed what is known as Moore's Law. He held that chip processing technologies tend to double every year-and-a-half.

"So far," stated a Fortune article, "Moore's law has been sustained by a regular cycle: Computer makers and software companies (especially Microsoft) develop new features and programs that require more power. Intel, meanwhile, creates brawny new chips to meet those new demands."

They were aided by a young man who tended to the manufacturing end of the business by the name of Andy Grove. The business was young and no consumer computing devices existed. The calculator was beginning to be introduced in business applications, but computer punch cards were still standard practice.

Marcian "Ted" Hoff, an Intel engineer, invented the microprocessor, and is credited as the man responsible for the personal computer industry. In 1971 he introduced a device known as the 4004—a microprocessor consisting of 2,300 transistors located on a sliver of silicon. It was one-eighth of an inch wide by one-sixth of an inch long. It was seen as an amazing invention, used primarily for calculating.

The 8008 microprocessor, the first chip to be actively marketed, and the one that had been developed with the 4004, first appeared April 1972. This chip moved rudimentary computing from 4- to 8-bit processing. Though this changed the complexion of the industry, it was not until IBM decided in the 1980s to use the Intel 8086 and 8088 microprocessors to create a personal computer. It was about this time that Apple Computer was founded, and began using components from rival Motorola.

"IBM's decision to support the 8086 microprocessor, running an operating system called MS-DOS, resulted in a software company called Microsoft, founded by Bill Gates and Paul Allen." Eventually, these two companies would become the two most powerful firms in a marketplace that is now worth billions of dollars annually," recounted a Computer Weekly article commemorating the twenty-fifth anniversary of Hoff's invention.

"Since Intel's launch of the 4004, faster, smaller, and more complex microprocessor devices have been developed. Intel, Texas Instruments, Advanced Micro Devices (AMD), Digital Equipment, Cyrix, and many others have deluged the industry with tiny black microprocessor chips that have altered the courses of our lives," an article in Computer Weekly stated. "But Intel has dominated the market for microprocessor chips and looks likely to continue this for quite some time, unless companies such as AMD can break its monopolistic grip.

"The Motorola 68000 microprocessor family has been the single most significant threat to the dominance of Intel in the chip business. Apple's all-out adoption of the 68000 for use in its Macintosh computers forged a market with 12 million-plus loyal customers.

"But Intel saw off this competition, and has beaten off the challenge from firms such as AMD and Cyrix, which introduced Intel-compatible processors in an attempt to hijack Intel's market. During the early 1990s, thanks to a huge investment program in chip manufacturing plants, Intel was able to maintain its position as the only firm able to satisfy the burgeoning demand for PC chips."

Industry estimates are that for each personal computer sold, Intel reaps about $300 in profits. The personal computer, however, is not the only consumer electronic device using Intel technology.

Intel has had its problems even in the midst of its success. The company, in an attempt to protect its technology, was tangled in suits with rival chip makers, particularly AMD. In a 1992 arbitration, Intel was ruled against and AMD's claims regarding a technology exchange upheld. The company took a further hit in 1994 when, shortly after the introduction of the Pentium processor, a problem was found in the chip's calculation abilities. Other concerns surfaced, as well, including the chip's tendency to overheat the circuitry in existing computer systems that had been upgraded.

Intel was integral in the industry celebration of the microprocessor's "birthday" at Comdex, the international computer trade show. This included a museum containing artifacts that showed the microprocessor's history from the Intel 4004 and Busicom calculator to consumer products, such as the TRS-80 and Commodore PET, in addition to modern devices such as smoke detectors—microprocessors are embedded into these.

Grove took over as chief executive officer in January 1987. Since that time Intel's average annual return to investors has been 44 percent. Grove was named chairman May 21, 1997, replacing Moore. The move was seen as being symbolic, since Grove had effectively been running the company since his appointment as chief executive officer.

According to Fortune, "Even though he was one of the handful of employees who got the company up and running in 1968, Grove has never been considered a founder—a status reserved for Moore and Noyce. They have been celebrated as legends and visionaries, aided in their success by Andy Grove, the efficient manager. Now he must be considered their equal."

Time Magazine named Grove its "Man of the Year" in the last issue of 1997, featuring his accomplishments and vision in a cover story. Shortly afterward, Grove stepped down as president, allowing Craig Barrett to take over the role of CEO.


STRATEGY

Intel has been in the business of introducing cutting-edge technology and getting consumers to pay for the research and development (R&D) of the gee-whiz speeds of its new chips. It is a cyclical process, which also necessitates more R&D of even faster, smaller products. The company does this to constantly renew the need and to keep its margins high. Intel spent $5 billion on capital projects and R&D in 1996, and had record earnings that year—$5.2 billion in earnings on sales of $20.8 billion.

This business model has been compared to the automotive industry's "planned obsolescence." A new model means the old model is not good, or new, anymore, therefore the consumer feels compelled to purchase the newest, latest, greatest product.

FAST FACTS: About Intel Corporation


Ownership: Intel is a publicly held company traded on NASDAQ.

Ticker symbol: INTC

Officers: Craig R. Barrett, Pres. & CEO, 58, $2,555,100; Andrew S. Grove, Chmn., 61, $3,255,400; Gordon E. Moore, Chmn. Emeritus, 69

Employees: 64,000 (1997)

Principal Subsidiary Companies: Intel's subsidiaries include: American Communications Exchange Inc.; Intel Corp. Military Special Products Div.; Intel Corp. Personal Computer Enhancement Div.; Intel Corp. Rio Rancho Div.; Intel Corp. Supercomputer Systems Div.; and Intel Products Group.

Chief Competitors: A maker of microprocessors, Intel's primary competitors include: Advanced Micro Devices (AMD); Cyrix; and Motorola.


According to a 1997 article in Fortune, "To ensure Intel's success over the coming five years, he has been maneuvering to make the PC the central appliance in our lives. In Grove's vision, we will use PCs to watch TV, to play complex games on the Internet, to store and edit family photos, to manage the appliances in our homes, and to stay in regular video contact with family, friends, and co-workers. If Grove's vision comes to pass, Intel will thrive. If it doesn't, Intel's strategy falls apart."

"'Intel is on a treadmill of new-product introductions fed by increasing demand for microprocessors," says Scott Randall, a security analyst at SoundView Financial in Stamford, Connecticut. "The day that tread-mill slows down is the day their business plan has to be rethought." That's why Grove has boosted the budget for projects that contribute to market development but have nothing directly to do with microprocessors. Such spending has gone from zero in 1990 to more than $500 million in 1996. Intel is the only company in the computer hardware business that can afford that kind of money: Its earnings exceed the aggregate profits of the top ten PC manufacturers combined."

In February 1998, Intel and Polaroid Corporation announced plans to produce an inexpensive digital camera using Intel technology, which would allow a consumer to take still pictures or video images, with use of the Intel 971 PC Camera Kit. This was one of several alliances Intel has made to include its technology in consumer items not normally associated with microprocessors.


CURRENT TRENDS

The trends are pushed by more powerful applications, which in turn necessitate new microprocessors and other new generations of computer products. Intel has been making this an integral part of its business plan. Slowing of computer sales in the United States has made an impact on the market, but again, new technologies and overseas sales keep Intel profits up. Most (71 percent) of Intel's products are sold in North America and Europe, protecting it, to some extent, from exposure to the 1998 Asian financial woes. However, almost one third of its revenues depend on Asian markets, which has entered a turbulent period.


PRODUCTS

Intel makes a wide range of computing products. These include video conferencing products, networking products, and a wide array of embedded devices. The mainstay of Intel's business is its microprocessors or chips. The most current of these is the Pentium line of microprocessors. In 1998 Intel introduced the 333-MHZ Pentium II processor, the first built on Intel's 0.25 micron process technology. Later in that year, it shipped higher MHZ versions designed to support high-volume workstations and servers.

CHRONOLOGY: Key Dates for Intel Corporation


1968:

Intel is founded

1971:

An Intel engineer invents the microprocessor, the 4004 Microchip

1972:

The 8008 microprocessor is Intel's first chip to be actively marketed

1981:

IBM decides to put an Intel microprocessor into its first PC

1982:

Intel creates the 286 chip with 134,000 transistors, the first chip to offer software compatibility with its predecessors

1985:

The Intel386 is released with 275,000 transistors and 5 million instructions per second capacity

1993:

The Pentium processor debuts with 3.1 million transistors and 90 million instrusctions per second capacity

1994:

A problem is found in the Pentium chip's calculation abilities

1997:

The Pentium II is released with 7.5 million transistors

1998:

Intel and Polaroid announce plans to produce a digital camera using Intel technology


CORPORATE CITIZENSHIP

In 1997, Intel contributed more than $96 million to colleges and universities, K-12 education, and community organizations located where Intel has a major facility. It awarded $2 million in scholarships and prizes at the 1998 Intel International Science and Engineering Fair for high school students held in Fort Worth, Texas. Paleontologist Dr. Richard Leakey presented the Glenn T. Seaborg Notel Trip Awards to two winners, 16-year-old Karen Mendelson of Worcester, Massachusetts and 17-year-old Geoffrey Schmidt of Little Rock, Arkansas which will allow them to attend the 1998 Nobel Prize ceremonies in Sweden.

CASHING IN ON THEIR CHIPS

It was in 1947 that Bell Labs invented the transistor and ushered in what might well be termed the Digital Age. Fifty years later, in 1997, Intel introduced its Pentium II processor. How much of an improvement was it on Bell Lab's original transistor? Well, each Pentium II has 7.5 million transistors embedded within it. These microscopic transistors each costs less than a paper clip, and they are etched into wafers of silicon to create their remarkable computing capabilities. How fast are they? They can perform 500 million instructions every second. And just think, in a few years, the Pentium II will be considered a laughably out-of-date antique.


GLOBAL PRESENCE

Intel Corporation owns 102 buildings and leases another 57. Intel has numerous manufacturing plants abroad, including facilities in Ireland, Israel, Malaysia, and the Philippines. In terms of its global sales, the majority come from Europe, with the next largest amount from the Asia/Pacific region.


SOURCES OF INFORMATION

Bibliography

dailey paulson, linda. "microprocessor enshrined at comdex museum." newsbytes, 19 november 1996.

fawcett, neil. "happy birthday, micro!" computer weekly, 17 october 1996.

kirpatrick, david. "intel's amazing profit machine." fortune, 17 february 1997.


For an annual report:

on the internet at: http://www.intel.com/intel/annual97/s_index.htmor telephone: (800)298-0146


For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. intel corporation's primary sics are:

3571 electronic computers

3577 computer peripheral equipment, nec

3674 semiconductors and related devices

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Intel Corporation

Intel Corporation

founded: 1968



Contact Information:

headquarters: 2200 mission college blvd.
santa clara, ca 95052-8119 phone: (408)765-8080 fax: (408)765-9904 email: [email protected] url: http://www.intel.com

OVERVIEW

Intel Corp. is a manufacturer of microprocessors, chipsets and motherboards, microprocessor peripherals, microcomputers and supercomputers, and semiconductors, including flash memory devices, best known for its "Intel Inside" advertising slogan designed to push its Pentium processors for personal computers. In June of 2002, Financial Times noted that good economic times for Intel, as the world's dominant power in chip production for PCs, communications equipment and mobile telephones, are crucial if the technology sector likewise is to prosper in coming years.



COMPANY FINANCES

Like all other giant chip makers, Intel, in early 2002, reported that the previous year's financial picture was the bleakest on record. To try to stop stock prices from sliding further, Intel curbed its production of chips. The good news was that Intel managed to check its downward slide by April 2002. Thanks to recovery shown by its microprocessor business, Intel reported a profit of $936 million for the first quarter of 2002. More good news for the quarter was that sales were up slightly for Intel, the posted $6.8 billion sales figure the highest in four quarters. The postings shored up confidence on Wall Street, and raised hopes that semiconductor sales would continue to show strong gains. However, at this writing in June of 2002, Intel shareholders were sorely disappointed when Merrill Lynch downgraded Intel stock, saying that the early hopes for semiconductor recovery earlier in the year were far too optimistic. By June, it was clear that Intel's sixth straight quarter of disappointing revenues was a reality. However, rather than stew, Intel's management turned to its technology sector to help bail out the company, spending $7.3 billion on new plants capable of turning out far more chips at lower costs than its rival chip powers.



ANALYSTS' OPINIONS

Just as miners once looked to canaries in cages to warn them when gases had turned mines dangerous, so too do modern financial analysts study Intel's bottom line each quarter to anticipate if corporate spending is at safe or troubling levels. Analysts and investors alike are all too aware that as Intel goes, so goes all indications for the general health of corporate spending in other business sectors for the immediate future. Tom Foremski of the Financial Times noted how Wall Street keeps an anxious eye on Intel's global microchip sales revenues to see if information technology as a while might ascend from below-ground levels to higher altitudes. "As the leading supplier of chips for PCs, communications equipment and mobile telephones, Intel sits at the center of a complex global web of technology products," "It can quickly detect any movement in the myriad supply chains and pick up the faintest signs of a turnaround," writes Foremski.



HISTORY

Intel Corporation was the creation of a couple of engineers who had left Fairchild Semiconductor in 1968 in an entrepreneurial desire to develop large scale integration technology for silicon-based chips. Robert Noyce had been the co-inventor of the integrated circuit while Gordon Moore was primarily responsible for the company's planning, and developed what is known as Moore's Law. He held that chip processing technologies tend to double every year-and-a-half.

"So far," stated a Fortune article, "Moore's law has been sustained by a regular cycle: Computer makers and software companies (especially Microsoft) develop new features and programs that require more power. Intel, meanwhile, creates brawny new chips to meet those new demands."

The founders were aided by Andy Grove who tended to the manufacturing end of the young business. Back then the calculator was beginning to be introduced in business applications, but computer punch cards were still standard practice in the computer technology industry.

Marcian "Ted" Hoff, an Intel engineer, invented the microprocessor, and is credited as the person responsible for the personal computer industry. In 1971 he introduced a device known as the 4004—a microprocessor consisting of 2,300 transistors located on a sliver of silicon. It was one-eighth of an inch wide by one-sixth of an inch long. It was seen as a breakthrough invention, used primarily for calculating.

The 8008 microprocessor, the first chip to be actively marketed, and the one that had been developed with the 4004, first appeared April 1972. This chip moved rudimentary computing from 4- to 8-bit processing. Though this changed the complexion of the industry, it was not until IBM decided in the 1980s to use the Intel 8086 and 8088 microprocessors to create a personal computer. It was about this time that Apple Computer was founded, and began using components from rival Motorola.

"IBM's decision to support the 8086 microprocessor, running an operating system called MS-DOS, resulted in a software company called Microsoft, founded by Bill Gates and Paul Allen." Eventually, these two companies would become the two most powerful firms in a marketplace that is now worth billions of dollars annually," recounted a Computer Weekly article commemorating the twenty-fifth anniversary of Hoff's invention.

FAST FACTS: About Intel Corporation


Ownership: Intel is a publicly held company, traded on NASDAQ.

Ticker Symbol: INTC

Officers: Craig R. Barrett, Director. and CEO, 62, $1.9 million; Andrew S. Grove, Chmn., 65, $1.8 million; Paul Otellini, Chmn., Pres., and COO, 51, $986,000

Employees: 83,400

Principal Subsidiary Companies: Intel's subsidiaries include American Communications Exchange Inc., Intel Corp. Military Special Products Div., Intel Corp. Personal Computer Enhancement Div., Intel Corp. Rio Rancho Div., Intel Corp. Supercomputer Systems Div., and Intel Products Group.

Chief Competitors: A maker of microprocessors, Intel's primary competitors include: Advanced Micro Devices (AMD), Cyrix, and Motorola.


"Since Intel's launch of the 4004, faster, smaller, and more complex microprocessor devices have been developed. Intel, Texas Instruments, Advanced Micro Devices (AMD), Digital Equipment, Cyrix, and many others have deluged the industry with tiny black microprocessor chips that have altered the courses of our lives," an article in Computer Weekly stated. "But Intel has dominated the market for microprocessor chips and looks likely to continue this for quite some time, unless companies such as AMD can break its monopolistic grip.

"The Motorola 68000 microprocessor family has been the single most significant threat to the dominance of Intel in the chip business. Apple's all-out adoption of the 68000 for use in its Macintosh computers forged a market with 12 million-plus loyal customers.

"But Intel saw off this competition, and has beaten off the challenge from firms such as AMD and Cyrix, which introduced Intel-compatible processors in an attempt to hijack Intel's market. During the early 1990s, thanks to a huge investment program in chip manufacturing plants, Intel was able to maintain its position as the only firm able to satisfy the burgeoning demand for PC chips."

Intel has had its problems even in the midst of its success. The company, in an attempt to protect its technology, was tangled in suits with rival chip makers, particularly AMD. In a 1992 arbitration, Intel was ruled against and AMD's claims regarding a technology exchange upheld. The company took a further hit in 1994 when, shortly after the introduction of the Pentium processor, a serious problem was found in the chip's calculation abilities, and the company's public relations suffered a direct hit. Other concerns surfaced, as well, including the chip's tendency to overheat the circuitry in existing computer systems that had been upgraded.

Intel was integral in the industry celebration of the microprocessor's "birthday" at Comdex, the international computer trade show. This included a museum containing artifacts that showed the microprocessor's history from the Intel 4004 and Busicom calculator to consumer products, such as the TRS-80 and Commodore PET, in addition to modern devices such as smoke detectors—microprocessors are embedded into these.

Grove took over as chief executive officer in January 1987. Since that time Intel's average annual return to investors has been 44 percent. Grove was named chairman May 21, 1997, replacing Moore. The move was seen as being symbolic, since Grove had effectively been running the company since his appointment as chief executive officer.

According to Fortune, "Even though he was one of the handful of employees who got the company up and running in 1968, Grove has never been considered a founder—a status reserved for Moore and Noyce. They have been celebrated as legends and visionaries, aided in their success by Andy Grove, the efficient manager. Now he must be considered their equal."

Time Magazine named Grove its "Man of the Year" in the last issue of 1997, featuring his accomplishments and vision in a cover story. Shortly afterward, Grove stepped down as president, allowing Craig Barrett to take over the role of CEO.

CHRONOLOGY: Key Dates for Intel Corporation


1968:

Intel is founded

1971:

An Intel engineer invents the microprocessor, the 4004 Microchip

1972:

The 8008 microprocessor is Intel's first chip to be actively marketed

1981:

IBM decides to put an Intel microprocessor into its first PC

1982:

Intel creates the 286 chip with 134,000 transistors, the first chip to offer software compatibility with its predecessors

1985:

The Intel386 is released with 275,000 transistors and 5 million instructions per second capacity

1993:

The Pentium processor debuts with 3.1 million transistors and 90 million instrusctions per second capacity

1994:

A problem is found in the Pentium chip's calculation abilities

1997:

The Pentium II is released with 7.5 million transistors

1998:

Intel and Polaroid announce plans to produce a digital camera using Intel technology

2000:

Pentium 4 processor-based PCs now can be used for absolutely the most sophisticated film and graphics chores

2001:

Intel introduces the Itanium processor for high-end servers and workstations, used for such needs as e-business transactions, database creation, computer-aided engineering, and medical, scientific, and engineering functions

2002:

Intel and other chip making giants reported that 2001 was the most disastrous year for unsold chips in the history of the industry


In 2002, Barrett continued to function as CEO, charged with the difficult job of revitalizing Intel in a time of economic lethargy—the worst year for Intel in its corporate history. In June 2002, Barrett addressed the need for the industry to pursue new growth opportunities while lowering operating costs. "The focus during these difficult times should be the return the industry generates on its capital investments," Barrett said at the communications industry's Supercomm 2002 conference, reprinted on the Intel Internet home page. "To improve on this return, innovation must pervade all aspects of the industry from value-added services and software to the underlying communications infrastructure."



STRATEGY

Intel has been in the business of introducing cutting-edge technology and getting consumers to pay for the research and development (R&D) of the impressive speeds of its new chips. It is a cyclical process, which also necessitates more R&D of even faster, smaller products. The company does this to constantly renew the need and to keep its margins high. Perhaps Intel's best year profitwise was 1996, when it spent $5 billion on capital projects and R&D, and had record earnings that year—$5.2 billion in earnings on sales of $20.8 billion. This business model of Intel's has been compared to the automotive industry's "planned obsolescence." A new model means the old model is not good, or new, anymore, therefore the consumer feels compelled to purchase the newest, latest, greatest product. This strategy backfired in 2001 and 2002 as business corporations saw the global economy stagnate and limited spending for upgrades of technology, seriously affecting Intel revenues.

CURRENT TRENDS

The trends are pushed by more powerful applications, which in turn necessitate new microprocessors and other new generations of computer products. However, when corporate spending on technology drops drastically, as occurred in 2001 and 2002, Intel not only stops recording immense profits but also has to rethink its research budget and marketing strategy. Slowing of computer sales in the United States has made an impact on the market, and by 2001, not even new technologies and overseas sales keep Intel profits up at a point that makes shareholders and analysts happy.


PRODUCTS

Intel makes a wide range of computing products. These include video conferencing products, networking products, and a wide array of embedded devices. The mainstay of Intel's business is its microprocessors or chips. The most current of these is the Pentium line of microprocessors.


CORPORATE CITIZENSHIP

Intel donates generously to education in hopes of training students to be computer literate, critical thinkers, and skilled at interpreting and assimilating information. According to Intel, the Intel(r) Innovation in Education Program is a global program aimed at turning out superior students, particularly in science, math, engineering, and technology education.

THOSE WHO CAN—COMPUTE!

Intel Corporation announced in 2002 that in a little over one year, the company expects to train one million teachers from many of the world's nations through the Intel Teach to the Future program. In teaming up with Microsoft, the program hopes to enable teachers to more effectively apply computer technology to achieve better outcomes in the classroom. "Intel's goal is to provide educational programs, ideas and support that encourage innovation and learning, especially in the areas of science, math, and technology education," said Wendy Hawkins, Intel director of Education in an interview reprinted on the Intel Web site. "Our education initiatives help youth to develop skills needed to succeed in tomorrow's workplace."


GLOBAL PRESENCE

Intel Corporation in 2002 expressly targeted key Asian nations as critical to the overall technology indus-try's efforts to restore prosperity in slack economic times and to stretch the capabilities of the world to conduct commerce and exchange information. In June of 2002, on the Intel home page, CEO Craig Barrett called for a better-planned marriage of computing and communications to achieve global cooperation to get "computing devices [that] communicate" and "communications devices [that] compute. "Growth will depend on accelerated broadband development and finding better ways to manage digital media over the Internet," Barrett said in remarks captured at a technology conference. He said that countries such as Korea and Japan need to put broadband as their first priority to achieve as much as 100 megabits per second.

SOURCES OF INFORMATION

Bibliography

detar, james. "itanium chip could put sun on the run intel rivalry intensifies." investor's business daily, 20 june 2002.

dieterich, robert. "intel plunge shows no tech stock is safe." bloomberg news, 10 june 2002.

foremski, tom. "investors look to intel for hint of uplift." financial times, 6 june 2002.

gaither, chris. "intel meets expectations for earnings." the new york times, 17 april 2002.

"shares tank on intel downgrade." united press international, 6 june 2002.


For an annual report:

on the internet at: http://www.intel.comor telephone: (800)298-0146

For additional industry research:

investigate companies by their standard industrial classificationcodes, also known as sics. intel corporation's primary sics are:

3571 electronic computers

3577 computer peripheral equipment, nec

3674 semiconductors and related devices

also investigate companies by their north american industryclassification system codes, also known as naics codes. intelcorporation's primary naics codes are:

334111 electronic computer manufacturing

334119 other computer peripheral equipment manufacturing

334413 semiconductor and related device manufacturing

421430 computer and computer peripheral equipment andsoftware

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"Intel Corporation." Company Profiles for Students. . Retrieved November 18, 2018 from Encyclopedia.com: https://www.encyclopedia.com/economics/economics-magazines/intel-corporation-0

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Intel Corporation

Intel Corporation

BUNNY PEOPLE CAMPAIGN
TIME FOR A PENTIUM II PROCESSOR? CAMPAIGN

2200 Mission College Blvd.
PO Box 58119
Santa Clara, California 95052-8119
USA
Telephone: (408) 765-8080
Fax: (408) 765-9904
Web site: www.intel.com

BUNNY PEOPLE CAMPAIGN

OVERVIEW

During the 1980s the popularity and performance of personal computers (PCs) experienced phenomenal growth. Chip maker Intel Corporation, based in Santa Clara, California, produced a major share of the microprocessors powering those PCs, leading the way in both consumer recognition and sales and claiming a 90 percent market segment share by the late 1990s. By 1990 Intel had begun to focus its marketing on shaping the corporate brand with newly hired agency EURO RSCG DSW Partners, Salt Lake City. The agency set out to create a brand image for Intel's chips as "The computer inside," a concept that, in a 1991 campaign, hit the bull's-eye. "Intel inside" became more than a campaign tag line; it was an industry icon.

Throughout the 1990s the PC industry faced an ever-increasing demand from consumers for faster, high-performance microprocessors for their personal computers. In 1997 Intel responded by introducing its most enhanced technology in 10 years, MMX and the Pentium II processor. Acknowledging the increasing trend to use PCs for entertainment as well work, Ann Lewnes, Intel's director of worldwide advertising, stated, "[The company's objective] is to create awareness and excitement among consumers. We wanted to position the product as fun, particularly for multimedia applications."

Intel was the only tech company to purchase ads for the 1997 Super Bowl's coveted commercial slots. During Intel's 30 seconds, "Bunny People" did the disco. These Bunny People were modeled after chip technicians who work in the hyperclean manufacturing rooms of fabrication plants. Their spacesuit like "cleansuits," or "bunny suits," are worn to prevent even the tiniest of particles from contaminating the processors. In the spot a group of Bunny People danced about in brightly colored lam, bunny suits. Said Lewnes, "These commercials are humorous, high-tech fantasies that show how fun computing can be with MMX technology." Another spot in the campaign featured Seinfeld star Jason Alexander as a hapless character hoping to impress potential blind dates via Intel's video phone. These spots, together with related print ads, radio spots, and promotions, spurred both consumer approval and rival spoofing and was the most comprehensive campaign ever undertaken by Intel.

HISTORICAL CONTEXT

By the 1980s computers had begun to move from a largely scientific and industrial market into the personal user market. Intel's 1989 ad campaign with Shafer & Shafer, an Irvine, California, tech agency, prompted consumers to upgrade their systems with the latest technologies. Intel had just released its 386 chip, an upgrade of

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its 286 chip. When computer makers and buyers did not rush to upgrade, a striking "Red X" campaign was designed. Print ads and billboards featured graffiti-esque red spray paint x-ing out "286" and scrawling in "386SX" in an effort to move consumers along the upgrade food chain. In 1990 Intel signed on EURO RSCG DSW Partners. That year's campaign, "The Computer Inside," focused on building the corporate brand. In 1991 the company launched "Intel Inside." The success of the "Intel Inside" campaign was due in part to brilliant co-op marketing—that is, paying PC makers to feature the logo in ads. Through a combined marketing effort between Intel and computer makers, the "Intel Inside" logo on PCs became a seal of approval in the minds of consumers.

Between the years 1989 and 1996 Intel's revenues soared from $3.1 billion to $20.8 billion, net income rose from $391 million to $5.2 billion, and market segment share grew from under 60 percent to 80 percent. The "Intel Inside" campaign had solidified Intel's image of superior performance, outweighing the fact that the company's microprocessors cost considerably more than those available from its competitors. Intel became a cash cow, with sales increasing a whopping 30 to 50 percent every year between 1994 and 1997.

As Intel's enviable success was turning heads and profits, their competitors were carving a different niche. Prior to 1997 the average PC price was $2,000. In that year Compaq Computer Corporation set an industry precedent by offering a high-powered PC at a bargain-basement price of $999, powered by rival Cyrix Corporation's MediaGX chip. The sub-$1,000 PC market proved irrepressible. Within a year nearly all major PC makers were offering the new price point, resulting in a segment sales increase from 7 percent of the U.S. retail market in 1996 to approximately 25 percent in 1997. Intel's president and CEO Dr. Andrew S. Grove explained the company's response to this competition to Business Week: "For us to walk away from a market whose size is going to be measured in tens of millions of units per year, maybe bigger, is inconceivable…. It is very important for us to participate at both ends of the wire." The company planned to make up for meager profits on the low end with increased volume and on the high-end with sales directed at server and workstation markets.

TARGET MARKET

The success of Intel's brand identification could largely be summed up in two words: "Intel Inside." The tag line had proven enormously successful in whispering "performance inside" into the ears of PCs buyers. Consumers wanted an assurance that their PC could go the distance double-time as they cruised the Internet, developed intricate audio and animation programs, and played power-hungry computer games.

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The age market for such a product was widespread—PC users from their late teens to late 40s. To reach such a diffuse target, the "Blind Date" and "Bunny People" spots were aired on such programs as ER, Seinfeld, and Veronica's Closet, with cable TV spots purchased on The History Channel, CNN, and A&E. The women's market was targeted with print ads placed in Self, Vanity Fair, Gourmet, and, for the first time, Martha Stewart Living.

The "Bunny People" spots proved the most popular aspect of the campaign. The mood set by Wild Cherry's boogie-down tune, "Play That Funky Music," hit home with those at both ends of the Baby Boomer generation. Boomers who had come of age during the 1970s identified with the disco reference from firsthand experience. The theme spoke to younger Boomers as well because the campaign was launched during a late 1990s nostalgia for anything from the 1970s. The hints of '70s nostalgia in the disco-themed ads proved a winner with the youngest target market segment as well. Intel's campaign had successfully caught the ears of all ages within its intended market.

COMPETITION

By the 1997 release of MMX technology, Intel had a decided claim on the title of world's top selling chip maker. Primary competition came from Cyrix Corporation's MediaGX processor and Advanced Micro Devices's (AMDs) K6chip. Intel had already earned a distinguished reputation for performance, if not low-end pricing. Rivals Cyrix and AMD set out to develop a reputation for high quality at a more competitive price than Intel's. Cyrix's 1997 marketing goals were strikingly similar to Intel's, with one exception. "People want to be entertained in their living room—they don't want just a productivity tool. Through our innovative processor and system technology, we've made possible an easy-to-use home infotainment system with PC capability that people can actually afford," stated Cyrix's vice president of corporate marketing, Steve Tobak, on the company's website. Intel's rivals had an edge in competing in the sub-$1,000 PC market, because their processors continued to be available at prices well below the Pentium's. Consumers had been offered a sub-$1,000 PC that could perform, and they scooped them up. Market segment share for the price point jumped from 10 percent in 1996 to upwards of 20 percent the following year. "It's the first time in many years that there has been a viable alternative [to Intel] at the low end," IBM senior vice president Samuel J. Palmisano told Business Week. His company tapped AMD's K6 chip for their low-end line of PCs. Intel's monopoly on high performance chips that could run desirable software had been challenged, and at a considerably lower cost to PC makers.

AMD's fall 1997 campaign, developed by Hill, Holliday Advertising, sent out just this message. One spot featured a secret agent held captive by an evil mastermind whose plot to rule the world is foiled when the processor in his expensive PC cannot deliver. Thanks to the AMD processor in his PC, the secret agent handily escapes. On AMD's website, Tom Stites, vice president of communications, said, "These television spots target personal computer consumers. Our intent is to show that buying PCs based on the AMD K6 processor is a smart choice. The message is that no matter how much or how little consumers are prepared to spend for a similarly configured system, they will get better performance with the AMD K6. Our message of performance and value is compelling, but our primary competitor outspends us on advertising by almost twenty to one. In order to be heard above the noise, commercials from AMD must break through with humor and excitement."

Apple Computer, Inc., could not have agreed more. In 1997 Apple joined forces with TBWA Chiat/Day for the first time in over a decade. This team was responsible for having produced Apple's legendary "1984" campaign, voted the best ad of all time by advertising professionals. In early 1998 the team followed their cerebral 1997 "Think Different" campaign with the "Toasted Bunny" spot, a direct spoof on Intel's disco dancing "Bunny People." Apple had already made fun of Intel's vaunted processor speed in a spot of a garden snail crawling along with a Pentium II chip on its back. Their "Toasted Bunny" spot featured a guy in a shimmering blue cleansuit, accompanied by the 1970s classic "Disco Inferno." As the foil-clad techie dances to the beat, his feet burst into flames, and he has to be doused by a fireman. Apple's website deepened the tease with, "Ah, there's nothing sweeter than the smell of toasted chips in the morning."

MARKETING STRATEGY

Intel's decision to take a more humorous marketing tack came about as chip suppliers were discovering that consumers were not responding well to ads dwelling on the technical intricacies of PCs. On television two "Blind Date" spots, starring Jason Alexander, were the first ads to lighten up. Director Jim Gartner, who had brought to life Pepsi's "Dad's Blessing," HBO's "Falling TV" and Visa's "Burro," teamed up with EURO RSCG DSW Partners in creating the spots, a tongue-in-cheek portrayal of Intel's video phone capabilities.

In the second round of spots, the Bunny People characters were introduced in a send-up of the boring geek stereotype. The first spot, debuting during the 1997 Super Bowl, contrasted a traditional fabrication-plant setting with a more free-spirited MMX technology department. Within this more fun-loving environment, the Bunny People danced the workday away, suggesting the PC user could experience new heights of fun with the aid of MMX technology. The Bunny People showed up on television spots throughout the year, and during the fall an international flavor was added by having the Bunny People travel the globe in a "TechMobile," created by Batmobile designers Trans FX of Los Angeles. In the "Road Trip" spot the Bunny People became so excited about Pentium II technology, they were inspired to build the TechMobile to help them spread the word around the world. In a second spot the TechMobile delivered the beloved Bunny People to Hong Kong, where they were hailed by crowds in awe of the marvels of Pentium II.

The television and print campaigns were complemented by radio commercials and an interactive sweepstakes. On the websites of MTV, Interzine, Gamespot, MPlayer, Hotwired, and Hollywood Online, users were supplied with clues for the official sweepstakes found on Intel's website.

Intel continued its proven track record of co-op marketing in 1997. The home PC buyer's awareness of the Intel microprocessor increased from 20 percent at 1992's campaign launch date to 80 percent in 1996, according to Dennis Carter, vice president of sales and marketing for the company. Even more impressive was the 90 percent recognition in the business market. Carter told Advertising Age magazine that 70 percent of home PC buyers and 85 percent of business buyers preferred Intel and were willing to pay the higher price the "Intel Inside" logo commanded.

PLAYING IS THE THING

Intel's "Bunny People" campaign succeeded in transforming supposedly geeky MMX chip technicians into fun-loving, dance-at-the-drop-of-a-keystroke guys. The ads were popular in consumer surveys, and thanks to Intel merchandising, anyone enamored with the brightly suited techies could take home an eight-inch beanbag doll version of their very own. Bunny People character dolls, available in an assortment of cleansuit colors, were among a treasure trove of merchandise developed around MMX technology. Consumers could pick up a Bunny People doll at their favorite computer outlet or log on to Uniquely Intel, the company's Internet merchandise catalog (http://www.intel.com), to scoop up Bunny People embellished beach towels, bags, tumblers, watches, and apparel.

Since the inception of "Intel Inside," consumers had shown a strong allegiance to the company's co-op efforts. According to a September 15, 1997, issue of Advertising Age, Intel had an estimated advertising budget of $900 million in 1997, $750 million of which went into co-op ads. As of 1997, approximately 1,500 PC makers were participating with Intel in co-op marketing, wherein they received a 6 percent rebate on chip purchases by tacking the Pentium logo on their PCs and ads. PC makers would come up with one-third of the cost of print ads and one-half that of broadcast costs. For the first half of the year, nearly 80 percent of the $202.9 million spent on U.S. PC advertising in computer and business publications featured the "Intel Inside" logo according to Sheila Craven, president of Adscope, an ad tracking company. Intel's contributions toward shared advertising proved irresistible, with every major Intel-based PC maker participating by 1996.

OUTCOME

Intel's "Bunny People" campaign proved a strong success, thanks to the uplifting image provided by Wild Cherry's "Play That Funky Music." A USA Today Ad Track survey found the spot among the top 10 favorite ads among baby boomer consumers, making it the most popular tech campaign ever measured by the poll. It ranked in the top 20 of 90 campaigns measured by Ad Track in a two-year period. The breakdown showed that 30 percent of those answering the survey claimed they liked the MMX ads a lot, with 38 percent of those between 18 and 24 giving the ads a thumbs up. A mere 8 percent of those polled felt the television spots were ineffective. Consumers said they felt the disco-dancing Bunny People imparted a fun, consistent image for the brand. Ricky Banaag, Intel Microelectronics country manager for the Philippines, told Newsbytes News, "Our research shows that the Bunny People characters have been a positive influence on Intel's brand personality. Bunny People characters have helped make the Intel brand more friendly and accessible."

Industry insiders were not necessarily so positive. Apple executive Allen Olivio called the "Bunny People" ads frivolous in Entertainment Weekly. "It's what happens to advertisers when they don't have anything to say." Marketing consultant Gary Stibel showed concern that Intel's funky ads might threaten the reputation for high quality secured with its earlier "Intel Inside" identification, and he suggested to USA Today that Intel should stick to a consistent image. A president of an undisclosed ad agency for a major computer client, commenting on Intel's focus on co-op marketing, told Advertising Age, "Most people that buy computers don't even know that that chip is in there. They care about the performance of the computer. It really doesn't matter what the chip is." But John Dahlin of EURO RSCG DSW Partners responded, "Ultimately the success of your work is the success of your client. What we do is produce advertising that works great for the problems that our client has. If it doesn't win a lot of awards … as long as a billion people buy Pentium, I can handle that." Intel could well handle its year-end report for 1997: revenue totaled $25.1 billion, with net income at $6.9 billion. It was the eighth consecutive year of earnings and revenue record setting for the world's largest chip maker.

FURTHER READING

Abrams, Judith. "Hearing Footsteps in Sub-$1,000 Market." Multimedia Monitor, November 1, 1997.

Armstrong, David. "Computers; Loose Connections." The Press, December 23, 1997.

Enrico, Dottie. "Consumers Bought into Real-World Ads in '97." USA Today, December 29, 1997.

――――――. "Consumers Flip for Hip Chip Ads but Is Intel's Image Being Squandered?" USA Today, May 12, 1997.

――――――. "For Advertisers, Age Starts to Matter." USA Today, September 22, 1997.

Goldfisher, Alastair. "Apple Torches Bunny in Latest TV Campaign." The Business Journal, San Jose, March 23, 1998.

"Intel Bunny People to Invade Aussie Living Rooms." Newsbytes News Network, February 26, 1997.

"Intel Launches $100+ Million Worldwide Ad Campaign." Computer Publishing & Advertising Report, September 29, 1997.

"Intel Unveils Global Pentium II Processor Ad Campaign." M2 PressWire, September 16, 1997.

Jacobs, A. J., and Shawna Malcom. "Spoof in Advertising: Imitation Is the Sincerest Form of Parody." Entertainment Weekly, April 10, 1998.

Johnson, Bradley. "Challenge for Intel: Boosting Tech Market." Advertising Age, September 15, 1997.

Reinhardt, Andy, Ira Sager, and Peter Burrows, "Cover Story: Intel." Business Week, December 22, 1997.

Seaman, Debbie. "What's the Big Idea?" Advertising Age's Creativity, May 1, 1998.

Stahlman, Mark. "MMX Is Great, But Do We Need It?" Computer Reseller News, February 10, 1997.

"US $10 Million Intel Media Blitz for Asia Pacific." Newbytes News Network, November 17, 1997.

                                                  Barbra Brady

TIME FOR A PENTIUM II PROCESSOR? CAMPAIGN

OVERVIEW

Intel Corporation, the world's largest manufacturer of computer chips, had used a consistent marketing strategy to make its brand universally recognizable. Since 1991 Intel had advertised its line of chips directly to consumers with the tag line "Intel Inside." By 1998, 80 percent of all active computers were powered by Intel's Pentium chip, and its share of the global chip market was also an impressive 80 percent. According to the National Post, Intel so "thoroughly dominate[d] the microprocessor industry that [its] slogan [had] become a defining reality of personal computing." Intel had thrived in part because its advertising had convinced consumers and business users to upgrade repeatedly to its latest products. As Advertising Age explained, Intel's marketing premise was to bill itself as providing "the fastest, latest, and greatest chips." In May 1997 Intel introduced the Pentium II, a microprocessor that was more powerful than its predecessors and also contained innovative MMX technology, which allowed for improved multimedia functions.

After initially pitching the Pentium II to the business side of the market, Intel decided that 1998 was the year in which to explain to a mass consumer audience why they should also buy personal computers containing the Pentium II. In September of that year, Intel launched its "Time For A Pentium II Processor?" campaign, which consisted of a trio of television commercials created by Messner Vetere Berger McNamee Schmetterer/Euro RSCG—the first work this agency had produced for Intel. The purpose of the three spots was "to dramatize the question of what would happen if the deficiencies of Pentium II's competitors (and progenitors) insinuated themselves" into the real world, noted Advertising Age on September 28, 1998. Although Intel's lead in the microprocessor market was substantial, its competitors had begun to make inroads by offering budget chips. Consumers were becoming increasingly unwilling to pay premium prices for Intel's cutting-edge technology when they could purchase computers powered by cheaper chips, that—although slower—were still capable of executing a variety of tasks.

The three "Time" spots humorously and hyperbolically illustrated the difficulties a failure to use a Pentium II processor could create. One ad depicted a sky diver whose parachute unfurls at a glacial speed. As he plummets towards the ground, a message box pops up on screen: "Processing parachute, please wait." Another commercial portrayed a soccer match in which the goalie had not fully downloaded. As the opposing team advances with the ball, only his legs have materialized and a similar "please wait" message is displayed. The final commercial featured a baseball game where the pitcher's fastball never arrives at home plate. "Whoaaa," the broadcaster exclaims as the ball hangs in the air, "the pitch hasn't processed yet. Aw, this slow processing thing is a tough break for this young kid." Another "window" appears—"Processing fastball"—to explain the delay. Each commercial closed with a voice-over querying, "Time for a Pentium II Processor?" accompanied by the "Intel Inside" logo. Intel was quite pleased with the spots. Not only did they boost sales of the Pentium II itself but they were lauded by consumers and advertising industry insiders alike.

HISTORICAL CONTEXT

Intel's greatest marketing innovation was to target a mass audience with its microprocessors. Beginning in 1989 with its famous "Red X" campaign on behalf of its 386 chip, Intel recognized the rewards afforded by hawking its wares directly to a broad range of consumers rather than simply aiming for technophiles. This approach was significantly at odds with what was then conventional wisdom concerning technology advertising. According to the September 15, 1997, issue of Advertising Age, ad critics derided Intel's consumer-based efforts because "most people that buy computers don't even know that the chip is in there … They care about the performance of the computer [not] what chip the chip is." Microprocessor manufacturers typically touted their products to original equipment manufacturers (OEMS), who assembled personal computers and then sold machines to the public. Intel, by contrast, believed that it could create demand for its products through savvy ads, and that by doing so it could get personal computer users to pay attention to microprocessor brands and even ask specifically for computers containing Intel.

"Intel Inside," which was conceived by Dahlin Smith White and debuted in 1991, consistently delivered the message that Intel's chips were superior. The first "Intel Inside" ads were designed to promote Intel's 486 chip (the successor to the 386), and the company continued to use the campaign as it rolled out new generations of ever more speedy and advanced chips including the Pentium and then the Pentium Pro chips. Early "Intel Inside" commercials took viewers on a high-tech voyage through the innards of a computer that ended at the processor, the "brain" of the machine. Later ads were more sophisticated, such as the company's "Bunny People" spots, which first aired during the 1997 Super Bowl, and depicted disco-dancing technicians adding fun to Pentium chips. (These "Bunny People" commercials were also the first to feature the Pentium II chip.) In addition to the television, print, and radio campaigns that ran under the umbrella of "Intel Inside," the company also sponsored an advertising co-op, in which it paid a portion of an OEM's marketing costs if the manufacturer would announce that its machines had "Intel Inside," generally accomplished by way of a sticker affixed to each computer made. By 1997 every major computer maker participated in the co-op, including Compaq, IBM, Packard-Bell, and Hewlett-Packard. Contrary to the glum forecasts of tech insiders, Intel's consumer-targeted campaigns were an unequivocal success. The company's revenue had grown from $3.1 billion in 1989 to $20.8 billion in 1996, and "its Pentium brand has become synonymous with the rise of the PC," declared Marketing.

The Pentium II was not only faster, but it also performed multimedia functions better than its predecessors. In May 1997 Intel launched a campaign for the Pentium II that sought to reach business PC users. This $20 million print and Internet campaign used the slogan "The Next Chapter in PC Technology," and appeared in newspapers such as the New York Times, Wall Street Journal, and USA Today.

TARGET MARKET

After completing the campaign aimed exclusively at business PC users, Intel focused on a mass consumer audience with "Time." While the market for technical products had once been dominated by a computing elite, one-third of all American households owned a PC by 1994, according to the Wall Street Journal on September 20, 1994. Reaching such a vast and diverse audience was a challenge. As Advertising Age explained on October 7, 1996, Intel's overarching goal was to craft advertisements that were "relevant to consumer and business targets" alike, across demographic and geographic divides.

The primary way "Time" attempted to appeal to a broad audience was to avoid technical terms and jargon that would alienate some consumers (albeit while catering to a more computer-savvy segment). This was a key shift from the "Bunny People" approach, which had reached a more technology-oriented audience with its focus on the chip-making process. Instead, the "Time" spots "cleverly connect[ed] the cold concept of computer processing power to real-life situations," according to the Orange County Register. Without resorting to a discussion of megabits or graphic interface, Intel perfectly illustrated the campaign's underlying premise that computer speed was a necessity. In this way, the campaign reflected the computing reality of the mass of people who used their machines mainly as tools to word process, surf the Internet, and download information from favorite Web sites. The spots tapped into the "frustration [such a consumer] feels if [her] PC isn't working as fast as it might," a Messner executive told Marketing. The campaign hoped to play off the frustration everyone felt at some point, as they sat by idly while their computers slowly downloaded a file. The "message bar" incorporated in the commercial ("Processing parachute") was nearly identical to those that cropped up on all machines during a download.

"Time" simultaneously strove not to alienate those whose computer skills transcended this basic tool level. As the Dow Jones News Service noted, Intel had to "reach the 'in' crowd while amusing the rest of the audience." The ironic humor of the spots helped fulfill this goal by ensuring that regardless of a viewer's level of technical know-how, the spots would be engaging and witty.

COMPETITION

Despite Intel's overwhelming past success in its consumer advertising, "Time" was launched at a crucial point for the company. In what the National Post termed "a rare, but costly stumble," Intel had "failed to foresee that many users would prefer low-cost PCs that handle[d] typical computing tasks with alacrity" instead of "costlier machines based on Intel's fastest and most lucrative processors." By the summer of 1997, the San Jose Business Journal reported the results of a survey conducted by ZD Market Intelligence, which indicated that a stunning 34 percent of U.S. businesses would consider buying PCs with a chip other than a Pentium, and 25 percent claimed they were "highly interested" in purchasing a non-Intel PC.

INTEL HITS A HOMER

Shortly after the debut of "Time for a Pentium II Processor?" Intel broke a more general branding spot featuring an unlikely hero—Homer Simpson of the hit comedy show The Simpsons. The animated commercial depicts the famously stupid Simpson getting a Pentium chip implanted in his brain. He becomes a brilliant professor, who formulates a sort of unified pastry theory. The spot, which appeared after November 8, 1998, closed with a shot of the back of Homer's head—on which was stamped the famous "Intel Inside" logo. An Intel marketing executive explained in a press release that "Homer Simpson is the perfect vehicle to communicate that having an Intel processor makes your computer smarter … If an Intel chip can turn Homer Simpson into a scholar, imagine what it can do for your PC."

Advanced Micro Devices Inc. (AMD) was one of Intel's competitors that was winning over OEMs and customers alike with its inexpensive chips. According to the National Post, AMD controlled 50 percent of the chip market for PCs costing less than $1,000 by 1998, and it was supplying chips for the consumer computer lines at OEMS, such as Compaq, IBM, and Packard-Bell, that had previously been Intel's exclusive domain. Part of AMD's strategy was to make consumers aware of its offerings. In 1996 the company launched a television campaign with the tag line "[email protected]" Created by Hill, Holliday, Connors, Cosmopulos, the spots detailed how AMD chips "make the technology that people use today more affordable, more powerful, easier to use," an AMD spokesperson told Advertising Age on October 7, 1996. In May 1997 AMD announced that it would price its chips 25 percent below the cost of a comparable Intel microprocessor. In 1998 AMD aired humorous spots that demonstrated the 3-D capabilities of its chips.

Cyrix, a unit of National Semiconductor Corp., also gained a foothold in the low-end computer chip market. In November 1998 Cyrix inaugurated its first branding campaign. As its focal point, Cyrix stressed its cheaper prices and positioned itself as an egalitarian product. The print and television campaign "intended to let consumers know that Cyrix is enabling the PC manufacturers to deliver high-performance computers … for well under $1,000," Cyrix's director of advertising told the November 2, 1998, Brandweek. The ads, which were designed by Goldberg Moser O'Neilland targeted first-time PC buyers, used bold drawing done in the Russian constructivist style to augment the campaign's tag line "The Liberation of Information." One print piece, "Liberty and Access for All," made its proletarian pitch: "Gen X-ers, empty nesters, boomers, cocooners, closet capitalists, web surfers, gainers, educators, unite."

In addition to this pressure at the less expensive end of the market, Intel also encountered more aggressive marketing from one of its high-end competitors, Apple Computer. After breaking out of its long slump, Apple debuted three competitive ads in March 1998. Crafted by TBWA Chiat/Day, these spots directly attacked the Pentium II. In one, a man wearing a suit identical to those of Intel's "Bunny People" has to be hosed down. As he looks at the camera with smoke pouring from his helmet, the voice-over (performed by actor Richard Dreyfus) declared, "Apple Computer would like to apologize for toasting the Pentium II processor in public." Apple claimed its G3 chip, which was a joint project between Apple, IBM, and Motorola, was twice as fast as the Pentium II. "Apple has to make some very strong product statements here," a company executive told the Wall Street Journal on March 26, 1998.

MARKETING STRATEGY

Intel selected television as the means to convey the message of "Time." Since the company sought to reach a mass audience, it selected an array of programs, ranging from The X-Files to major sporting events to late night chat shows, on which to air its spots. To heighten the impact, the campaign debuted during the season premieres of heavily watched shows such as NBC's Thursday night titans Seinfeld and ER. The company also used web banner ads to spread its message. These efforts featured a slow moving download screen similar to the television executions.

Intel's goals for the campaign were two-fold. Since the company wanted to drive sales for the Pentium II, the product's name featured prominently in the tag line in each commercial. On the other hand, because Intel was increasingly under siege from competitors who sold bargain chips, Intel needed the campaign to reinforce its overall branding message. Therefore, while the commercials used the speed of the Pentium II's as a specific product selling point, the implicit message was "to educate our consumer audience about what role the processor plays in their PC and the value of it," Joanne O'Brien, Intel's manager of consumer advertising, told Brandweek on October 26, 1998.

Ever since Intel had first ventured into consumer advertising, it was faced with a challenge. Because its chips grew exponentially more advanced every few months, Intel was continually in the midst of introducing a new microprocessor. Its advertising had somehow to cultivate consumers' desire for the latest and fastest chip. As the September 15, 1997, Advertising Age explained, "Intel's future depends as much on marketing as it does on technology … it must continue to create demand for its ever-faster chips." "Time" strove to incite this demand. By presenting the problems of the technical world in the "real" world of the commercials' soccer game and skydiving, Intel sought to make the speed of one's processor less a concept of computing and more about computing's growing power over life. The divide between reality and virtual reality was blurred in the spots. The campaign's chief goal was to encourage viewers to feel a sense of concern over matters technical, and then to find a solution in the message of the ads. "Time" worked to make consumers "feel comfortable with a … product that was impersonal," according to USA Today.

OUTCOME

Intel expressed satisfaction with "Time." The humorous vignettes combined with Intel's persistent use of the "Intel Inside" tag line, helped fuel sales of the Pentium II. In addition, the campaign was credited with reinforcing the Intel brand before an even more massive launch campaign—the one for the Pentium III microprocessor early in 1999.

"Time for a Pentium II Processor?" was also quite well-received by its target audience. Consumer surveys revealed that the "Time" ads were the best-liked advertising Intel had ever released. Moreover, advertising critics were enthusiastic. While many of Intel's previous efforts had been soundly panned within the ad industry, "Time" spots received plaudits from advertising critics. Advertising Age 's Bob Garfield praised the campaign on September 28, 1998, for focusing on the product and successfully distinguishing its from its competitors. "Anyone who has ever tried to multitask or download video understands" the spot's moniker, he noted.

FURTHER READING

Beatty, Sally Goll. "Apple's Ads Scorch Intel Bunnies." Wall Street Journal, March 26, 1998.

Garfield, Bob. "Intel Downloads Chip Woes into Real World." Advertising Age, September 28, 1998.

Goldfisher, Alastair. "Intel Plants New Brain in Homer: Chipmaker Latest to Air Consumer-Oriented Commercials." San Jose Business Journal, November 9, 1998.

Goldman, Kevin. "Computer Companies Try TV Ads' Mass Appeal." Wall Street Journal, September 20, 1994.

"If Only Homer Simpson Had a Brain! It Happens, in New Intel Campaign." Brandweek, October 26, 1998.

Johnson, Bradley. "Advanced Micro Devices Spreads Word on Its Chips." Advertising Age, October 7, 1997.

――――――. "Challenge for Intel: Boosting Tech Market." Advertising Age, September 15, 1997.

――――――. "Computer World's Task: Sell 1 Brand to 2 Targets." Advertising Age, October 7, 1996.

McLuhan, Robert. "Speed Is the Issue for Intel." Marketing, December 3, 1998.

Nguyen, Peter. "Short Cuts." Orange County Register, October 11, 1998.

Piller, Charles. "Intel's Dominance under Siege." National Post, February 26, 1999.

Wells, Melanie. "Toon Town Takes Over Baby Boom." USA Today, November 4, 1998.

                                          Rebecca Stanfel

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Citation styles

Encyclopedia.com gives you the ability to cite reference entries and articles according to common styles from the Modern Language Association (MLA), The Chicago Manual of Style, and the American Psychological Association (APA).

Within the “Cite this article” tool, pick a style to see how all available information looks when formatted according to that style. Then, copy and paste the text into your bibliography or works cited list.

Because each style has its own formatting nuances that evolve over time and not all information is available for every reference entry or article, Encyclopedia.com cannot guarantee each citation it generates. Therefore, it’s best to use Encyclopedia.com citations as a starting point before checking the style against your school or publication’s requirements and the most-recent information available at these sites:

Modern Language Association

http://www.mla.org/style

The Chicago Manual of Style

http://www.chicagomanualofstyle.org/tools_citationguide.html

American Psychological Association

http://apastyle.apa.org/

Notes:
  • Most online reference entries and articles do not have page numbers. Therefore, that information is unavailable for most Encyclopedia.com content. However, the date of retrieval is often important. Refer to each style’s convention regarding the best way to format page numbers and retrieval dates.
  • In addition to the MLA, Chicago, and APA styles, your school, university, publication, or institution may have its own requirements for citations. Therefore, be sure to refer to those guidelines when editing your bibliography or works cited list.