Nice article
Intel Insider -- Paul Otellini Has Worn Many Hats At Intel,
From Grove's Technical Assistant To Leading The
Microprocessors Group. Could The CEO Crown Be Next?
Lisa Spiegelman
Palo Alto, Calif. -- Whether it is chips or chiefs, Intel Corp.'s road map for
the next generation is always pretty clear.
While the company put Craig Barrett in charge only in May, Intel is busy
grooming the next heir apparent. And that person, according to several
insiders, is Paul Otellini.
If true, Otellini will join the distinguished ranks of Robert Noyce, Gordon
Moore, Andrew Grove and Craig Barrett as the future leader of the Santa
Clara, Calif., chip maker.
As a visionary in the making, Otellini's current challenge is implementing Intel's
market segmentation strategy. And that is no easy task, analysts and industry
executives said.
On the low end, Otellini has to develop Intel's response to a changing PC
market where demand for sub-$1,000 PCs is booming. On the high end, he is
to formulate a plan for more specialized PCs.
"As computers become more pervasive, one size will not fit all. People will
want to buy only the machines for the task they want," said Otellini, executive
vice president and general manager of Intel's Architecture Business Group.
But Otellini's ability to quickly respond to change will help the executive,
co-workers said.
"To successfully run a business like this, you need to anticipate change. Paul is
superb about that," said Karen Atler, Intel's director of microprocessor
marketing and business planning. "He is an interesting blend of incredible
intellectual power and tremendous energy."
Otellini uses that energy to develop products that meet the needs of the
low-end, high-end or mobile markets. "[It takes more than pricing.] You have
to tailor your whole development stream, not just silicon," he said.
"We have played in the low end for the last year by pricing Pentium cheaply,
but that is not a great way to play long term," Otellini said.
Intel has been hit hard by the burgeoning sub-$1,000 PC market. No longer
are VARs selling the fastest computer. Instead, VARs are selling inexpensive
PCs that can run the software, analysts said. And while that is great for PC
buyers, it wreaks havoc on Intel's high-margin, high-profit business model,
said industry watchers.
"Intel's business model has always been making money producing the next
fastest and better processor and now we're in a market where people don't
care about the fastest and best. They care about getting a computer that runs
the software just fine," said Dean McCarron, an analyst with Mercury
Research, a research firm in Scottsdale, Ariz.
What is more, Intel's initial efforts to compete in the sub-$1,000 PC market
with its Celeron chip were met with lackluster reviews because it was slower
than rival chip products from Advanced Micro Devices Inc., Sunnyvale,
Calif., and National Semiconductor Corp.'s Cyrix Corp., Richardson, Texas,
analysts said.
Thus, Intel's future may well depend on Otellini's success at steering the chip
maker through these changing times, said industry watchers.
"Otellini has to meet the challenge of the $1,000-and-under PC marketplace,"
said Carl Everett, a former Intel executive who is now a senior vice president
at Dell Computer Corp., Round Rock, Texas. "It's a price point that has
caused the PC market to grow but you can't find anyone that has made any
money in it."
Others agreed.
"It is significantly more difficult to make money there . . . . The processors are
selling for $50 in the low end. Intel makes between $500 to $700 on one
processor in a high-end system," said McCarron. "Intel has been late, but the
reason [they] are late is: Why on earth would they give up 50 percent
margins?"
Otellini also has to successfully sell Intel's product branding strategy.
"If Intel is going to be successful as three brands, he has to have the vision to
lay it out and the discipline to execute it," said Everett.
Meeting new challenges, however, is nothing new to Otellini.
"I have always had to fend for myself," said Otellini, 48, who worked his way
through school by selling everything from men's suits to hot dogs at the ball
park.
He earned a B.A. in economics in 1972 from the University of San Francisco
and an M.B.A. from the University of California at Berkeley in 1974.
Born and raised in San Francisco, Otellini still lives in the city by the Bay.
Since joining Intel in 1974, Otellini has driven one to one-and-a-half hours
each way between San Francisco and Intel's headquarters in Santa Clara.
And his career has kept pace with his mileage.
Starting as a programmer in 1974, Otellini worked his way up through the
financial ranks to Group Controller for microprocessor products in 1980.
Otellini said he picked Intel because he wanted to be in the high-tech industry
and, "I like products. I like things that are tangible."
He then was assigned to manage Intel's business with IBM Corp. from 1980
to 1985-a critical time in the development of personal computer business.
"It was a wonderful time through the ramp-up of the 8088, 286 and the early
design stages of the 386, and if you remember, Compaq [Computer Corp.]
ended up leapfrogging IBM with the 386," he said.
Otellini's next assignment landed him in Folsom, Calif., as general manager of
Intel's Peripheral Components Operation. Today, he is credited with launching
the company's peripheral chip business.
In 1987, Otellini was promoted to general manager of the Folsom
Microcomputer Division.
"He had a vision to stick with the peripheral chip business and fund it before it
was a success," said Everett. Intel's peripheral chipset business generated
$1.2 billion in sales in 1997, according to Mercury Research.
"I got Intel to understand that if you could somehow get another piece of
silicon or pieces of silicon around the microprocessor when the volume was
ramping on a given generation, you could greatly increase your returns," said
Otellini.
In 1989, he became Grove's technical assistant-a job where he did whatever
Grove, then president of Intel, wanted, said Otellini. "It is really fun, and it is
hard. You don't have a moment where you are allowed to be intellectually
dishonest. You are completely on all the time," he said.
Everett said, "Being Andy's TA means he got strategically in step and
cultivated. That is a great learning experience, and I think Paul really
blossomed in that role."
Like other Intel executives being groomed for the top ranks at Intel, Otellini
has been assigned to increasingly more challenging and broader jobs.
During Otellini's 24-year career at Intel, for example, he has worked in
finance, sales, product development, international, sales and marketing.
"The worse thing you can do in this industry is to get stale or to get bored, and
the only way to avoid that is to put yourself on the line," said Otellini.
In 1990, Otellini was promoted to general manager of the Microprocessors
Group where his responsibilities included managing the introduction of the
Pentium products. Then, in 1994, he was reassigned to sales and marketing.
"Craig felt that if it makes sense to rotate people early in their career to grow,
it makes sense for people later in their career to grow," Otellini said.
Otellini's success has positioned him as one of the most senior managers at
Intel today. He was elected a corporate officer in 1991, a senior vice
president in 1993 and an executive vice president in 1996.
Much of Otellini's success is credited to his willingness to move into areas
where he has little experience and his ability to quickly respond to change.
Such strengths make him well-suited to tackle today's changing markets, Intel
insiders said.
Otellini, for example, has managed Intel's product development even though
he is not an engineer and doesn't have an engineering degree.
"I think it helps sometimes not to have the in-depth knowledge in things so you
can ask those quote 'dumb' questions that sometimes often kind of change the
rules," Otellini said.
Otellini's weakness is that he can get easily frustrated. And he shows it.
"He can be uncomfortable. I have seen him when he is stern, and I think he
needs to soften up with the public," said Everett.
But Otellini also can be very social and quick-witted, said Atler, adding: "He
can go to a sales meeting and get down and play pool with people.
"Barrett is more a disciplined, forceful individual. Andy is a tremendous people
person. He can read people better than anyone I've ever seen. But Paul, you
can pick on Paul and he will laugh at it. He's just naturally a more social
character than either of them," she said.
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