Eckhard's Gone but the PC Rocks
On
Andy Grove: The PC Industry Won't Be
the PC Industry
Over breakfast with Fortune's David Kirkpatrick, Intel's chairman
envisions an industry that blends communications, the Internet, and
PCs.
David Kirkpatrick
In late April, Andy Grove sat down
for breakfast with this writer at New
York's St. Regis Hotel. Now Intel's
chairman--but no longer CEO--Grove
spends much of his time thinking
strategy. Needless to say, Intel's
long-term plans have a big impact on
the future of the PC industry.
Health conscious ever since being
diagnosed with prostate cancer,
Grove brought his own plastic bag of
dry cereal, and added fruit and skim
milk. We asked the waiter to take the
butter away, and Grove started
talking about the changing industry
landscape:
The Internet defines computing. Networked
applications define the opportunity. Intel itself is
obsessed with moving our commercial activities
onto the Web. That requires us to have networks
linked to our distributors and suppliers.
Computing infrastructure is now being driven by
different business considerations. For more than 15
years, what Intel brought to the party was
high-performance microprocessors for desktop PCs.
In the last five we started to bring microprocessors
to server infrastructures, and for more than five we
have been getting into the chip-set business and the
communications-chip business.
Intel has bemoaned the lack of new PC applications
for years. But this stuff people do with the Internet
is application development not just for the desktop
PC but for this universe of communication
computers, servers, and desktop PCs.
Will PC companies remain your primary
customers in the future?
Yes. But the PC industry won't be the PC industry.
The players are shifting their strategies and product
mixes. This is the old strategic inflection point. Our
most important customers will be the ones who make
the transition aggressively. The PC companies'
business is not going away. But if you hang on too
strongly to the old business model and do not make
investments in the emerging part of the business,
you will be on the periphery.
So what will PC companies look like?
Servers and communications devices will be a major
part of their business.
Will you sell lots of networking products and chips
to Dell, Compaq, HP, IBM, and Gateway?
Yes. We do today.
Would they remain bigger customers than the
Ciscos, Nortels, Lucents?
That's a question I cannot answer. Communications
and computing are merging, and I would like to see
us be building-block suppliers to all of them.
How would you rate the PC industry's ability to
understand these changes?
Medium. The problem is that almost every company
has this kind of capability inside the company, but
they are segregated into the networking or
communications-related departments, or whatever.
The integration process has not really even started.
These current boxes designed by disparate
divisions in the same company will eventually be
unified boxes provided by integrated divisions.
A top technology investment banker told me that no
pure-play PC company can be a growth company
anymore.
If you're only good at building PCs in large volume,
then what your person said is right. You'd better
find other revenue sources, because PC prices
decline. But the same technology that allowed me to
build a high-volume PC business allows me to build
a high-volume communications or server business,
and integrate those pieces for customers.
What's ahead is an enormous period of
reengineering the infrastructure on which
commerce is based. That is not a stagnant business.
That is a huge business. But it's a broader business
than selling the access device for a network.
What about the proliferation of inexpensive non-PC
devices? Can Intel be a major supplier for the guts
of those devices?
The PC will react, like an organism fighting off an
intruder. The most important device will be the
low-cost PC, streamlined to be more functional and
reliable than today's PC. When prices come down to
the $300 to $400 level, the cost imperative will force
us to reengineer the device in ways we should have
done long ago.
Will we still have something called a PC industry
in five years?
No. Well, it will be a subindustry. Obviously, PCs
are going to be supplied, but the companies will not
define themselves as PC companies. They will make
the transition. I don't know about the name--maybe
they'll be called suppliers of
computing-communication devices. |
