Online Extra: Craig Barrett on the Digital Future

Craig R. Barrett, CEO of Intel (INTC) since March, 1998, is racing to reinvent the company before he steps down next year. He has embarked on an ambitious diversification strategy to make Intel chips the foundation around the world of everything from PCs and servers to cell phones and telecom equipment. This includes spending $28 billion on R&D and capital projects over three years to build five new cutting-edge plants, which many worried would give Intel too much capacity. Now, some of the factories have been completed, and they're running at full tilt.

The 64-year-old chief executive spoke with BusinessWeek Correspondent Cliff Edwards in early February about his goals and why he thinks Intel is poised to succeed in areas where it has failed time and again. Following are edited excerpts of their conversation:

Q: You guys are making a big play. You took a big risk with manufacturing -- were you nervous?

A: The nervousness was not so much making the investment. The nervousness was: When would you start to see some form of recovery? And when would we start to get the benefit of the investment? I didn't think the benefit would ever elude us. It was just a matter of when, not if. We've always had this very simple philosophy, which is: You invest your way out of a recession. And that's what we did.

Q: Intel's motto hasn't been "give the customer what they want," has it?

A: Oh, c'mon. "The customer is always right, give the customer what they want," has been a motto around [Intel] forever. We've been on this technology treadmill, this technology machine for 30 years. More recently, I think the industry has turned toward the total solution and end-user requirements -- in addition to creating great technology. We were able to get by for 20 years creating great technology and this gee-whiz stuff in the first personal computer and the first cell phones. And now you see in all those areas people are starting to put user-defined benefits in them.

Q: What do you think led that change?

A: To some degree it's the relative maturity of the industry. And to some degree it's that the industry as it has matured is moving away from a strict technology-for-technology's-sake approach to "how does technology solve real problems?"

Q: You guys want to be the essential player of the Digital Age. Do you think you can accomplish that?

A: That remains to be seen. All of the signs are there. Everything in the world is going digital. After 20 years of talking, this so-called convergence of computing and communications is happening. And why is it happening? Because communications is going digital. And in the same breath as communications going digital, entertainment is going digital. All of a sudden, you've seen everything around us transformed into a digital character.

We're able to bring our expertise into different areas where we really had no unique experience, no unique capability before. What in the world is associated with computers and entertainment until you started to get digital-content creation? You go see a movie, and you have no idea what's digital and what's real. So all of a sudden computers play a role in that.

Now you're starting to seeing the possibility of the home going digital. There's an opportunity for people who have digital expertise to play in a bunch of different areas. That wasn't the case five years ago

Q: A lot of people say you guys have been saying this for nearly 10 years. What's different?

A: Digital content is real. Digital communications is real. You go back six, seven years ago, communications was basically analog. All of a sudden, all of this technology has coalesced, and it has made the environment totally different around the world.

Q: How does your global reach help?

A: There are a bunch of capabilities that Intel brings, which we should work to make a competitive advantage. One is the global reach of our sales and marketing organization, the global reach of our brand. The other thing is we have this manufacturing machine, which we've made big investments in, and the manufacturing and its attendant technology give us the advantage. We have our Intel Capital organization which allows us to invest in the infrastructure and help align other people's products, business plans, etc., with what we do.

A typical day at Intel, we're investing heavily in products, we're investing heavily in manufacturing, technology, and manufacturing plants, invest heavily in the brand, invest heavily in expanding our sales reach, and with every major program we have with new products. We tend to have a major investment program in our Intel Capital organization, whether it's wireless or the digital home or whatever.

It's that -- I hate to use the word holistic because it's kind of an overused word -- but it's that holistic approach to this thing that we try to bring to the game. It doesn't mean we don't have competition, it doesn't mean we can't make a mistake in pricing, it doesn't mean we can't have a program slip here or there. But it's that momentum of all five of these things operating in parallel, which makes me very comfortable with our current position.

Q: Can you be a disruptor in these markets?

A: If you go into established markets, probably the fastest road to success is to look for markets that are undergoing transitions. Market shares are gained and lost in market transition. We look at those transitions, and we try to determine our strategies to take advantage of those transitions.

Q: What do you think about the Advanced Micro Devices (AMD) threat this year?

A: You know, there's been buzz about AMD for 25 years. They've bet their company strategy on the 64-bit stuff (see BW Online, 2/16/04, "The 64-Bit Question").

Q: You said earlier that you're talking technology transitions. It sounds like they're trying to make technology transitions happen by pushing 64-bit [chips]?

A: Well, there are two types of technology transitions. There are top-down and dictated transitions: This will be good for you, you're going to love it, so go out and buy it.

And then there's what I call the bottoms-up transition. Wi-Fi is a classic bottoms-up transition. Nobody went out and told the world that Wi-Fi is going to be great, and you're going to love it. The big companies, initially Intel included, sat back, and it was the power users, the geeks, the nerds who went out and started putting up their little Wi-Fi networks and taking their Pringles cans on a string and aiming it as an antenna to one another -- and then all of sudden everybody recognized, "This solves a problem." Solving a problem is what people want.

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