The paranoia paid off at Intel
By Hiawatha Bray, Globe Columnist, Globe Staff, 6/8/2000
Intel Corp. chairman Andrew Grove is a smart man, so he probably knows the
German word ''Schadenfreude'' - pleasure at the misfortunes of others. I could
have asked him when he visited the Globe last week, but he would not have
appreciated the question.
''It's a cheap thing to gloat,'' Grove said, without a trace of irony. He knows too
well that his company could have been sharing a cabin on the Titanic with
Microsoft Corp.
Intel, at times, has dominated the microprocessor business almost as
completely as Microsoft controls desktop computer software. And Grove is just
as competitive as his ally and sometime rival, Microsoft chairman Bill Gates.
So how has Intel dodged the antitrust bullet that's liable to blow Microsoft
apart? Because Grove knew when to duck. Fifteen years ago, to be exact.
Grove is famous for his quip that ''only the paranoid survive.'' Last week, he
described just how paranoid he really is.
After all, in 1985 antitrust should have been the least of Intel's worries. America
was Reagan country then and had little use for antitrust enforcement. His
administration, remember, had abandoned the 11-year-old case against IBM
Corp.
Besides, Intel in 1985 was on the brink of annihilation. Back then, much of its
revenue came from the production of memory chips, and the Japanese were
cutting Intel's throat with better products at lower prices.
This was the year Grove and his colleagues made the decision that saved their
company: no more memory chips. Intel would bail out of the business and
concentrate on microprocessors, a market in which the Japanese had never
gained a foothold.
It was also the year of the first truly modern Intel processor, the 386. This chip
processed data 32 bits at a time, compared to the eight- or 16-bit capacities of
earlier Intel chips. That made the 386 the first Intel chip powerful enough for
multitasking, or running multiple programs at the same time.
It took another five years for Microsoft Corp. to deliver a decent version of
Windows software capable of using the power of the 386. But Grove says that
even in 1985, Intel expected the 386 and its descendants to dominate the
market. And even then, a staggering, bloodied Intel began to plan for the day it
would become a monopoly.
''What we decided was, we've got to play this very carefully,'' Grove said.
The company started hiring antitrust experts to master the relevant laws. It
wasn't just a matter of beefing up the legal department. Intel's executives and
sales people were also taught the new rules of engagement.
Intel went so far as to hire attorneys to browbeat employees. ''People knew
what cross-examination was like,'' said Grove. ''We brought in outside lawyers
to take mock depositions.'' They weren't gentle about it, either. The sessions
left many an Intel executive sweaty and terrified.
Microsofties are a pretty paranoid lot, as well, but they mainly learned to fear
Bill Gates, a man who has displayed a John Gotti-like contempt for the federal
government. Grove, a refugee from communist Hungary, would never make
such a mistake.
So when the Federal Trade Commission launched an antitrust investigation of
Intel a couple of years ago, the company didn't rant or rail or vow to fight to the
last ditch. Instead, it settled. End of story.
Now, instead of spending his days huddled with corporate attorneys, Grove can
focus on securing Intel's future.
The company has made an $800 million commitment to Massachusetts at its
chip factory in Hudson. Furious demand for Pentium chips has led to
shortages; by this time next year, Hudson should be banging them out, along
with its present output of networking chips and StrongARM processors for
hand-held devices.
There are already 1,800 Intel workers in the state, with another 1,000 hires
likely in the next year or so. There's also the launch later this year of Itanium,
Intel's biggest processor upgrade since the first Pentiums.
And, of course, Intel must figure out how to do business in a world with multiple
Microsofts.
''If there's a split-up,'' said Grove, ''it's fair to say that we'd have a much more
complex relationship.'' Maybe so. But Grove probably started planning for it 15
years ago.
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