Computer World...!: May 2007

Intel Corporation (NASDAQ: INTC; SEHK: 4335) is the world's largest semiconductor company and the inventor of the x86 series of microprocessors, the processors found in many personal computers. Founded in 1968 as Integrated Electronics Corporation and based in Santa Clara, California, USA, Intel also makes motherboard chipsets, network cards and ICs, flash memory, graphic chips, embedded processors, and other devices related to communications and computing. Founded by semiconductor pioneers Robert Noyce and Gordon Moore, Intel combines advanced chip design capability with a leading-edge manufacturing capability. Originally known primarily to engineers and technologists, Intel's successful "Intel Inside" advertising campaign of the 1990s made it and its Pentium processor household names.

Intel was an early developer of SRAM and DRAM memory chips, and this represented the majority of its business until the early 1980s. While Intel created the first commercial microprocessor chip in 1971, it was not until the creation of the personal computer (PC) that this became their primary business. During the 1990s, Intel invested heavily in new microprocessor designs and in fostering the rapid growth of the PC industry. During this period Intel became the de facto monopoly supplier of microprocessors for PCs, and was known for aggressive tactics in defense of its market position, as well as a struggle with Microsoft for control over the direction of the PC industry.

By the early 2000s, Microsoft had passed Intel in power in the PC industry, and competitors had emerged in the advanced microprocessor market. Intel's November 2006 stock market capitalization was less than one-quarter of its 2000 high, and only 40% of Microsoft's.

The 2007 rankings of the world's 100 most powerful brands published by Millward Brown Optimor showed the company's brand plummet 10 places – from number 15 to number 25

History

Intel was founded in 1968 by Gordon E. Moore (a chemist and physicist) and Robert Noyce (a physicist and co-inventor of the integrated circuit) when they left Fairchild Semiconductor. A number of other Fairchild employees also went on to participate in other Silicon Valley companies. Intel's fourth employee was Andy Grove (a chemical engineer), who ran the company through much of the 1980s and the high-growth 1990s. Grove is now remembered as the company's key business and strategic leader. By the end of the 1990s, Intel was one of the largest and most successful businesses in the world, though fierce competition within the semiconductor industry has since diminished its position.

Intel has grown through several distinct phases. At its founding, Intel was distinguished simply by its ability to make semiconductors, and its primary product were static random access memory (SRAM) chips. Intel's business grew during the 1970s as it expanded and improved its manufacturing processes and produced a wider range of products, still dominated by various memory devices. While Intel created the first microprocessor in 1971, by the early 1980s its business was dominated by Dynamic random access memory chips. However, increased competition from Japanese semiconductor manufacturers had by 1983 dramatically reduced the profitability of this market, and the sudden success of the IBM personal computer convinced then-CEO Grove to shift the company's focus to microprocessors and to change fundamental aspects of that business model. By the end of the 1980s this decision had proven successful, and Intel embarked on a 10-year period of unprecedented growth as the primary (and most profitable) hardware supplier to the PC industry. After 2000, growth in demand for high-end microprocessors slowed and competitors garnered significant market share, initially in low-end and mid-range processors but ultimately across the product range, and Intel's dominant position was reduced. In the early 2000s then-CEO Craig Barrett attempted to diversify the company's business beyond semiconductors, but few of these activities were ultimately successful. In 2005, CEO Paul Otellini reorganized the company to refocus its core processor and chipset business on platforms (enterprise, digital home, digital health, and mobility) which led to the hiring of over 20,000 new employees. In September of 2006 due to falling profits, the company announced a restructuring that resulted in a workforce reduction of 10,500 employees or about 10 percent of its workforce by July of 2006. Its research lab located at Cambridge University was closed at the end of 2006.

In September 2006, Intel had nearly 100,000 employees and 200 facilities world wide. Its 2005 revenues were $38.8 billion and its Fortune 500 ranking was 49th. Its stock symbol is INTC, listed on the NASDAQ.

From DRAM to microprocessors

In 1983, at the dawn of the personal computer era, Intel's profits came under increased pressure from Japanese memory-chip manufacturers, and then-President Andy Grove drove the company into a focus on microprocessors. Grove described this transition in the book Only the Paranoid Survive. A key element of his plan was the notion, then considered radical, of becoming the single source for successors to the popular 8086 microprocessor.

Until then, manufacture of complex integrated circuits was not reliable enough for customers to depend on a single supplier, but Grove began producing processors in three geographically distinct factories, and ceased licensing the chip designs to competitors such as Zilog and AMD. When the PC industry exploded in the late 1980s and 1990s, Intel was one of the primary beneficiaries.

Intel, x86 processors, and the IBM PC

Despite the ultimate importance of the microprocessor, the 4004 and its successors the 8008 and the 8080 were never major revenue contributors at Intel. As the next processor, the 8086 (and its variant the 8088) was completed in 1978, Intel embarked on a major marketing and sales campaign for that chip nicknamed "Operation Crush", and intended to win as many customers for the processor as possible. One design win was the newly-created IBM PC division, though the importance of this was not fully realized at the time.

IBM introduced its personal computer in 1981, and it was rapidly successful. In 1982, Intel created the 80286 microprocessor, though IBM chose not to use that, embarking on an effort to produce its own x86 processor under a cross-licensing agreement with Intel. Compaq, the first IBM PC "clone" manufacturer, in 1985 produced a desktop system based on the faster 80286 processor and in 1986 quickly followed with the first 80386-based system, beating IBM and establishing a competitive market for PC-compatible systems and setting up Intel as a key component supplier.

Pentium flaw

Main article: Pentium FDIV bug

In June 1994, Intel engineers discovered a flaw in the floating-point math subsection of the Pentium microprocessor. Under certain data-dependent conditions, low-order bits of the result of floating-point division operations would be incorrect, an error that can quickly compound in floating-point operations to much larger errors in subsequent calculations. Intel decided to correct the error in a future chip revision, but nonetheless declined to disclose it.

In October 1994, Dr. Thomas Nicely, Professor of Mathematics at Lynchburg College independently discovered the bug, and upon receiving no response from his inquiry to Intel, on October 30 posted a message on the Internet[1]. Word of the bug spread quickly on the Internet and then to the industry press. Because the bug was easy to replicate by an average user (there was a sequence of numbers one could enter into Microsoft's calculator tool to show the error), Intel's statements that it was minor and "not even an erratum" were not accepted by many computer users. During Thanksgiving 1994 the New York Times ran a piece by journalist John Markoff spotlighting the error. Intel changed their position and decided to offer to replace every chip with a problem, quickly putting in place a large end-user support organization. This resulted in a $500 million charge against Intel's 1994 revenue.

Paradoxically, the "Pentium flaw" incident, Intel's response to it, and the surrounding media coverage propelled Intel from being a technology supplier generally unknown to most computer users to a household name. Dovetailing with an up tick in the "Intel Inside" campaign, the episode is considered by some to have been a positive event for Intel, changing some of its business practices to be more end-user focused and generating substantial public awareness, while avoiding (for most users) a lasting negative impression.

Competition, antitrust and espionage

Two factors combined to end this dominance: the slowing of PC demand growth beginning in 2000 and the rise of the low-cost PC. By the end of the 1990s, microprocessor performance had outstripped software demand for that CPU power. Aside from high-end server systems and software, demand for which dropped with the end of the "dot-com bubble", consumer systems ran effectively on increasingly low-cost systems after 2000. Intel's strategy of producing ever-more-powerful processors and obsoleting their predecessors stumbled, leaving an opportunity for rapid gains by competitors, notably AMD. This in turn lowered the profitability of the processor line and ended an era of unprecedented dominance of the PC hardware by Intel.

Intel's dominance in the x86 microprocessor market led to numerous charges of antitrust violations over the years, including FTC investigations in both the late 1980s and in 1999, and civil actions such as the 1997 suit by Digital Equipment Corporation (DEC) and a patent suit by Intergraph. Intel's market dominance (at one time it controlled over 85% of the market for 32-bit PC microprocessors) combined with Intel's own hardball legal tactics (such as its infamous 338 patent [2] suit versus PC manufacturers) made it an attractive target for litigation, but few of the lawsuits ever amounted to anything.

A case of industrial espionage arose in 1995 that involved both Intel and AMD. Guillermo Gaede, an Argentine immigrant formerly employed both at AMD and at Intel's Arizona plant, was arrested for attempting in 1993 to sell the i486 and Pentium designs to AMD and to certain foreign powers.^[1]^[2] Gaede videotaped data from his computer screen at Intel and mailed it to AMD, which alerted Intel and authorities, resulting in Gaede's arrest.^[3] Gaede was convicted and sentenced to 33 months in prison in June of 1996.

Intel and free software

Intel has a significant participation in the open source communities. For example, in 2006 Intel released MIT-licensed X.org drivers for their integrated graphics cards of the i965 family of chipsets. On other occasions, Intel released FreeBSD drivers for some networking cards [10], available under a BSD-compatible licence, which were also ported to OpenBSD. However, after the release of the wireless products called Intel Pro/Wireless 2100, 2200BG/2225BG/2915ABG and 3945ABG, Intel is being criticized for not granting free redistribution rights for the firmwares that are necessary to be included in the operating systems for the wireless devices to operate. [11] As a result of this, Intel became a target of massive campaigns to allow free operating systems to include binary firmwares on terms acceptable to the open source community. Examples of negative press include an article by Linspire-Linux creator Michael Robertson in March, 2003. In the article titled: " Is Intel's "Centrino" Techno-Latin for "No Linux?"", Robertson goes on to outline the difficult position that Intel is in releasing to Open Source, but not wanting to upset their large customer Microsoft. Although Intel has received significant negative attention as a result of the wireless dealings (for another example, Theo de Raadt of OpenBSD claimed that Intel is being "an Open Source fraud" after an Intel employee presented a distorted view of the situation on an open-source conference [12]), the binary firmware still has not gained a license compatible with free software principles.