Dancing to Intel's tune Bellwether: Intel Corp., provider of the brains of 85 percent of the world's computers, continues to spend immense sums to stay ahead of the competition.

September 15, 1997|By Greg Miller | Greg Miller,LOS ANGELES TIMES

SANTA CLARA, Calif. -- Wearing a glittering gold suit and tinted mask, Andy Grove assumed perhaps the most precarious position of his career: standing before an audience of thousands while holding one foot in the air.

Then he stomped it down, and suddenly lights came up, music thumped and Grove -- the 61-year-old chief executive of Intel Corp. -- was the lead dancer in a parody of the company's disco-themed ad campaign.

The stunt delighted a crowd gathered to hear him deliver a keynote speech this summer at a convention of computer game makers. And certainly Grove has reason to dance.

Intel is in the midst of a breathtaking run. Profit -- $5.16 billion last year -- has nearly quintupled since 1992 and ranks among the highest of any company in the United States. Its microprocessors are the brains of 85 percent of the world's computers. The company's stock price has soared about 750 percent in the past five years.

Along the way, Intel has become one of those rare American companies that looms even larger than its statistics. Its stock is a bellwether for the computer industry. And its Santa Clara campus is a mecca for techies from around the world.

But when asked about this tide of good fortune, Grove has a predictably paranoid response: "I cringe."

Indeed, as he leads a company that has been growing so fast for so long, Grove must now find a way to keep the dance going. To accomplish that, he is counting on Intel's ability to become the choreographer for an entire industry.

No longer merely the world's largest maker of microprocessors, Intel has transformed itself into the industry's most powerful marketing presence, a giant financier of new personal computer technologies and -- as Grove's trade show appearance demonstrates -- the industry's most tireless advocate.

The stakes are huge. Every year, Intel ratchets up its multibillion-dollar budget on new plants and equipment that won't produce microprocessors for years, creating enormous pressure to make sure somebody will be waiting to buy all those chips. Any hiccup in the growth of the PC industry can be terrifying. And sources of indigestion are mounting: Intel's longtime alliance with Microsoft Corp. is fraying, rival chip makers are showing newfound spunk and some Silicon Valley giants are aiming to displace the PC altogether.

"The threat to Intel," Grove says, "is momentum."

The responsibility for handling this threat falls primarily to Grove and Intel President Craig Barrett.

As chief executive of Intel for the past decade, Grove has increasingly played the role of visionary, and much of Intel's transformation is according to his design.

Barrett, 58, heads Intel's vast manufacturing operations, which stretch from China to Israel. Barrett helped make Intel's plants the most productive in the industry. His promotion to president earlier this year established him as Grove's likely successor.

To maintain Intel's growth, Grove and Barrett have devised a strategy that sounds deceptively simple but that taps the extent of Intel's vast resources. "Everything Intel does," Barrett says, "is targeted toward creating new users and new uses for the PC."

Intel would seem an unlikely marketing powerhouse. After all, the company makes a product most consumers have never actually seen and typically don't understand. Until about 1991, the company didn't even bother with consumer marketing.

But this year, Intel will spend about $900 million on advertising -- triple the sum spent by Microsoft -- on a program considered one of the most successful in the high-tech industry's history.

The most obvious components of the program are the "bunny people" ads that feature disco-dancing Intel workers wearing brightly colored "clean" suits.

But the bulk of Intel's marketing money isn't spent on its own ads. More than 80 percent of Intel's budget -- or about $750 million this year -- goes toward reimbursing computer companies for the cost of their ads, according to Bradley Johnson, technology editor of Advertising Age magazine. The best way to sell more microprocessors, Intel believes, is to sell more computers.

Participating computer makers are reimbursed for two-thirds of the cost of a print ad and half the cost of a television ad, as long as their spots feature the Intel logo and their machines bear "Intel Inside" stickers.

Intel was founded in 1968 by Robert Noyce, who invented the silicon microprocessor, and Gordon Moore, who predicted that microprocessors would double in power every 18 months. Despite that heritage, Intel still needed a big break to pull away from the pack of semiconductor companies. That break came in 1981, when Intel's 8088 processor was chosen by IBM for its first PC.

"Intel built this self-perpetuating money machine based on the -- initial profits from being in the IBM PC," said Linley Gwennap, editor of Microprocessor Report in Sunnyvale, Calif. "Instead of throwing a party, they threw all that money back into building more factories and designing better chips."

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