Sample Presentation Who is Intel Worlds largest producer

Sample Presentation

Who is Intel? • World’s largest producer of semiconductor microprocessors • Tremendous growth under Andy Grove as CEO • Craig Barrett became CEO in 1997

Latest Annual Revenue 1, 3, 5, 10 yr. Growth in Revenues

PC Components 84% market in PC processors 2 2 100% of profits 90% of revenues 2 2 Growth in Processor market slowing Down

Intel & the Changing Landscape ýPC at the center of computing universe in the 90’s ýNext decade INTERNET IS IT! Implications: Old rules of Computerdom no hold longer

Transition-Related Bumps 8% compound growth rate over the past Revenue growth slowed to 5% from 30% Blunders in 1999: W chipsets delivered months late W embarrassing design bugs W supply shortages two years

PC Pothole • Earnings declined for the 1 st time in a decade • Low Cost PCs • Stock down 30% and off its peak for most of 1998 • Industry Consolidation

Changing PC Dynamics & Intel Assumption: Customers would clamor for more power to run fatter software programs Reality: Customers wanted cheap PCs to go online. Competitors grabbed 20% of the market share in 1997 (highest in half a decade) Previous Corporate Mission: Leading Purveyor of PC technology Existing Corporate Mission: Provide Building Blocks for the Entire Net Economy

The Creosote Bush • Drips poisonous oil, kills everything around it • Dominant microprocessor strategy was Intel’s creosote bush • No other businesses could sprout around it

Intel at Crossroads, Again? ? Microprocessors Inflection Point Business Goes To New Heights Valley of Death Memory Chip Business Declines 1985

Internet appliances Intel at Crossroads, Again? ? Business Goes To New Heights Inflection Point Valley of Death Microprocessors Business Declines 1999

Responses to Crisis X Copy Exactly X segment the microprocessor market X reorganize X Think big, broaden the pond, 10 X Rule

Objectives è Growth Rate 15 -20% a year è New businesses to be No. 1 or No. 2 è Grow faster than the industry è Technology leader è Profitable

Copy Exactly M Every plant is identical –Down to the colors of paint t easy to roll-out new production Techniques M dramatic Boost in productivity & Quality

Segment the Microprocessor Market UCeleron: Inexpensive PCs UPentium III: Middle Tier of Market UXeon: High-Powered Servers and Workstations Results: Celeron market share Up from 30% to 62% 60% gross margins Revenues from Xeon chips to double

Dismantled previous centralized management structure Reorganize Break Intel into five groups and the managers of these groups report directly to him ØNetworking Chips ØCommunication Products ØComputer Processors ØInformation Appliances ØNew Business

Think Big, Broaden the Pond, 10 X Rule Seminars for top 400 Managers Day 1: Develop and nurture an entrepreneurial spirit Day 2: Disruptive Technologies Day 3: Business Ecosystems

Develop and Nurture an Entrepreneurial Spirit Thinking Green: figure out how to grow new businesses in the shadow of the “creosote bush” OLD NEW

Disruptive Technologies Cheap steel reinforcing bars (rebars) Dismissed as insignificant by industry giants Rebar companies nibbled their way into the market for higher value steel PCs and mainframes Japanese automakers and small cars

Digital Rebar • Cheap PCs could nibble up the high end computers • Aggressive Celeron marketing even at the risk of cannibalizing sales of pricier chips • Intel Capital • Opening of the minds

Business Ecosystems v. Construct new webs of relationships v. Help seed emerging business ecologies v. Invested $6 billion to acquire companies v. Providing seed money of more than $1. 2 billion

Think Big, Broaden the Pond, 10 X Rule 1. Intel Capital DLaunched in 1991 DTo invest in companies that created “waves of excitement” DTo expose the company to every facet of the Internet economy

Think Big, Broaden the Pond, 10 X Rule 1 a. Intel Capital DFund has increased from $300 million in 1997 to $1. 2 billion in 1999 DHas stakes in more than 350 software and internet companies DNotable hits: Red Hat, Inktomi, e. Toys DHoldings valued at more than $8. 2 billion D$327 million in pretax income

Think Big, Broaden the Pond, 10 X Rule 2. New Business Group ÐNew rules for funding new projects ÐNo more tight budgets ÐNo more rigorous reviews of internal startups ÐSimilar to venture-capital financing ÐLaunched about 25 seed projects ÐSpent more than $50 million on these projects

2 a. New Business Group ÐWeb-hosting for clients (Citigroup) ÐVivonic: digital handheld health planner ÐPass. Edge: technology for protecting digital content ÐInstalling 3, 000 information terminals on the back of seats of Madison Square Garden ÐEquip doctors with secure Ids to encourage online medicine

Web War New Competitors Unfamiliar Territory VS.

Think Big, Broaden the Pond, 10 X Rule 3. Information Appliances “Move Intel into the home, somehow” Screen phones E-mail terminals TV set-top boxes

Think Big, Broaden the Pond, 10 X Rule 4. Communication Products ÉHome Networking ÉBroadband Modems ÉPC-based Telephony ÉServer Appliances ÉEthernet Hubs ÉSmall Networking Switches ÉSpecialized Servers for Web Traffic and speeding up e-commerce

Think Big, Broaden the Pond, 10 X Rule 5. Networking Chips v. Fastest growing category among chips v. Used in modems, network interface cards, switches, and routers v. Acquired a lot of companies Level One Communications ($2. 2 billion) Net. Boost ($215 million) Softcom Microsystems ($149 million)

The Future of Intel • Many skeptics • The creosote bush is no longer thriving at Intel • Enormous potential for growth • Moving in the Right Direction? ?