CEO talk:Craig 'The cool-man' Barrett,Intel Corp-Informative&Insightful.
Craig:
Just came across this interview,I think it is worth reading if one wants to know what is going in the biz.
(BTW, he just returned from a whirl-wind trip to China,India and other Asian countries.)
Source:CMP via Comtex.
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DELL COMPUTER CORP
INTEL'S BARRETT: SECOND HALF IS ALWAYS STRONGER
Nov 20, 1998 (Tech Web - CMP via COMTEX) -- While Intel pulled out of the Comdex/Fall '98 trade show this week by opting not to display its wares on the show floor, Intel president and CEO Craig Barrett was busy in meetings at a hotel in Las Vegas and participated in the keynote panel event called "Technically Incorrect," a spoof of the popular Politically Incorrect TV show. Barrett also spent time with a half-dozen EBN editors, who peppered him with a broad range of questions. Below are excerpts of that interview.
EBN: We thought a good place to start would just be to ask your opinion about the global market. We've gotten a lot of reports that seem to be a bit on the rosy side from the SIA and from some of the analysts.
Barrett: I think the first half was slow partially because of a big inventory glut in the channel. The second half is always stronger, and the second half was stronger. Inventory seemed to be way down -- channel inventory -- and everybody's following Dell's working process, so inventories are down. Europe is strong, AsiaPac is starting to recover a bit. We had a slight, ever-so-slight record revenue in AsiaPac last quarter, and it's strengthening still. Japan looks like it's a really, really weak sister in the marketplace at this stage. Europe is strong, the U.S. is strong. Asia's OK.
EBN: Can you hazard a guess as to whether this is a quarterly uptick, or are we starting to spin back out of the cycle?
Barrett: Europe is always very seasonally strong. Some of the positive environmental issues are there for next year. We don't appear to have a huge channel inventory that was present toward the end of last year, so that should be a positive. Anytime the channel inventory is low it aids us, because that flushes stuff out of the line. And the only bit of philosophical wisdom I can give you is, I think Asia is still very contingent on what Japan does. With Japan, you get consumer confidence back. If Japan falters and goes downhill, they're likely to take Asia with them.
EBN: What about the Chinese market? They seem to have been pretty resilient in their decision not to devalue the currency. Is the market in China even big enough to have an impact?
Barrett: The Chinese market is probably the No. 3 or No. 2 market in the world, and growing. So they're big enough company. Their market has been very strong lately, just like India has. The Chinese have just a very interesting appetite for technology. In both the government and the private sector, there's just wonderful education; the parents want their kids to succeed, and are absolutely convinced that their kids will only succeed if they have a technology background, computers. [Typically it's] two parents, the four grandparents, the father working, child computing.
EBN: What do you see in the sub-$1,000 PC market? Do you see it continuing to grow, or taking a larger share?
Barrett: The statistics in the last couple of months have shown it's kind of stabilized. I've always been a fan of the sub-$1,000 market. It's probably good for the industry as long as it doesn't cannibalize the entire industry. If it gets more people into buying for the first time, then it's got to be good for the market. We're going to assume that it would stabilize at some level.
EBN: When you say cannibalize the entire industry, you're talking ...
Barrett: Yeah, if people buy nothing but $500 PCs, I don't think the DRAM guys are going to like it, the hard-drive guys aren't going to like it, the processor guys won't like it, and the computer OEMs won't like it. Nobody will like it except maybe the consumer.
EBN: How do you distinguish the set-top box from the home PC?
Barrett: One of them is basically a reprogrammable personal computer, the other is basically recycled information. Our generic definitional difference is to push [Intel architecture] in the reprogrammable space and StrongARM in the embedded-processor space. We're targeting the two at different times.
EBN: Will they remain distinct markets as we head out? There's a lot of talk of convergence.
Barrett: There's a lot of talk of everything. There's been talk that in three years the PC is gone, and all you have are appliances. Except when I walk around and I ask people who are writing that, then I ask them to show me some appliances. They talk about WebTV, and I'm not quite sure, but I suspect WebTV has probably got sales of about 500,000 after a couple of years. Maybe it will get to a million in a couple of more years. And in a couple of more years we'll be selling I don't know how many PCs a year, but well over 100 million. If that's the main appliance, it's hard to imagine that it's going to do anything to the PC.
EBN: One of the big trends in the last year has been the build-to-order movement at the top-tier PC OEMs, and we're seeing it spread to the middle tier and into other system markets as well, such as communications. How important is that in terms of your strategy, how are you reacting to that trend, and what kind of things are you working on in that area in terms of logistics and serving that channel?
Barrett: The whole BTO deal is wonderful as far as we're concerned. It [creates] inventory holding points. In our business, it's creating new technology and not rushing through as fast as possible. If you look at the leader in that field, which is obviously Dell, they're not encumbered by last month's product while working on this month's product. If the rest of the industry can follow suit, that would be really cool. What we do to service that is we have two kinds of separate programs. One is called supply-line management, where we work with our major OEMs, which basically lets us look into their work in process and their orders and their needs and their inventories, and assemble it back into our supply chain so we can match things up as close as possible. The other thing we do is through the Internet. All of that is real-time, build-to-order supply communication.
EBN: Have your suppliers and manufacturing partners reacted accordingly as well, or do some of them still need to do a lot of work in this area?
Barrett: What you really want to do is look at people's production schedules and their WIP and what they've got in inventory, be able to add that up, and make sure nobody's over-ordering. Then our supply chain now starts to get in on it. There's a kind of matching function, a kind of virtual factory.
EBN: The program's pretty much in place now?
Barrett: It's in place at major OEMs, they've gotten under this pretty seriously. It's everybody's goal to go to BTO, so now everybody's had to react.
EBN: How are you seeing the role of the purchaser in the market change?
Barrett: Well, I would expect that everybody kind of mirrors what Intel is doing, and Intel mirrors what everybody is doing. We've had our purchasing organization tied in with our new-product guys for some period of time, and the assembly or packaging side, they work very closely together. The rapid introduction of technology is not that purchasing gets to go stand by itself in a corner, just order stuff and it's a standard specification, standard drawing, static drawing. It's pretty dynamic across the board. I think in the ideal world you'd have to have a team. You have the manufacturing, purchasing, and product-development people all working hand in hand.
EBN: As you move outside the major PC manufacturers to the rest of the mass market that might or might not be struggling to try to deal with Intel on Intel's terms, and they might not be a big enough player, how do you address that to some of the smaller OEMs? Are there initiatives in place?
Barrett: Well, a large proportion of the non-major OEMs get handled through distribution, and distributors are big enough guys to have the same interface to us as the major OEMs.
EBN: Are they doing a good enough job relating to them on Intel's behalf?
Barrett: Historically, the small guys around the world are introducing technology just as fast as the major OEMs. If you go to Argentina, Chile, Brazil, China, or India, you find the street-corner guys are pumping out 450-MHz systems almost faster than Compaq or IBM are putting their boxes into those markets. So they seem to do a very good job. The legends of the world, which have gotten to be a reasonable-size OEM today, are very aggressive with new technology. There's a combination here of putting mechanics in place to allow people to manage their inventory, and then there's a mind-set, which is, how fast are you going to move to new technology? And what sometimes you lack in mass and size in one, you can make up for with speed and agility and fortitude in the other.
EBN: Do you believe that Intel is easy to do business with at all levels?
Barrett: Our base of measure, which goes onto every employee's bonus program ... is our vendor-choice rating from our top 100 or so customers. The vendor-choice rating is given by the customers, not given by Intel. We try to ingrain that in everybody's brain, in the financial sense.
EBN: The world's been watching Microsoft in a fishbowl for the last month. Have you drawn anything you care to share with us vis- -vis the upcoming FTC case against Intel? Any lessons learned, any observations you care to make?
Barrett: We're very comfortable with our case with the FTC. It's quite different from the Microsoft deal, which is a "'You did this,' 'No we didn't'" type of situation. Ours is, we both agreed -- that is, the FTC and Intel agreed -- on what we did. We disagree on the interpretation of the law, and have a disagreement on the case law.
EBN: What is it that you agree on?
Barrett: Oh, it's an issue of, if the company has intellectual property, do you have to share that property with someone who's suing you, threatening to put you out of business? Or do you have the right ... to the intellectual property, and you use that intellectual property to benefit your shares? Intel says yes and the government says no. It's the simplest way I can put it. We think we're in an appropriate and good position, and we think we'll prevail when we get to a nonbiased jury trial. The initial findings will be made by an employee of the FTC [an administrative law judge].
EBN: Does that mean you think it will take an appeal to win?
Barrett: I would hope that we would be sustained in front of the administrative law judge. I assume that the individual would try the case on its merits. It's kind of a strange deal to have someone accuse you of something, then have one of [their] employees pass judgment on you.
EBN: Let's talk about your [$500 million] investment in [DRAM maker] Micron Technology. Rumor was, you offered more money to invest in Micron, and they accepted ...
Barrett: We never comment on rumors. It's not been a bad investment so far [given a jump in Micron's stock price].
EBN: Do you look to Micron to help on Direct Rambus?
Barrett: Of course. We wouldn't make the investment otherwise.
EBN: There are still some challenges for Direct Rambus. It's a big chip, runs hot.
Barrett: Sounds like a microprocessor, right?
EBN: If it's going to charge a premium in the marketplace, it's going to be slow to develop in the marketplace. It would be nice if it shrinks, and it would be nice if you could find ways to solve some of the heat problems. Are you looking to solve some of them?
Barrett: Well, we've been working all of the DRAM companies for some period of time. We're committing our product line to the second half of this year, so we want to make sure the supply is there, so that's why we're doing things like make the Micron investment.
EBN: And your roadmap still goes from PC 100 to Direct Rambus, and not porting to double-data-rate?
Barrett: There may be other solutions, but right now, Rambus is preferred.
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