A New Brain For Intel

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Perhaps more wounding was the fact that longtime allies seemed to be abandoning Intel. Microsoft announced that it would turn to IBM for the chips for its next video-games console, the Xbox 2, though it was Intel x86 chips that powered the original Xbox. Kevin Rollins, the new CEO of Dell--the world's biggest manufacturer of Intel PCs--mused publicly about the possibility of switching to AMD chips. (Rollins has since decided to stick with Intel.) Craig Barrett, the current Intel CEO, who will step down in May, went into mea culpa mode. "This is not the Intel we know," he wrote in an e-mail to employees. At an industry conference last year, he literally got down on his knees and begged forgiveness. "We don't sugarcoat our issues," says Barrett. "If you operate at the leading edge, you can't be afraid of failure."

Failure, of course, is not what Otellini has in mind. So how does he see Intel handling this raft of new challenges? For most companies, losing the CEO (Barrett must step down at age 65, according to Intel policy) would only add to the crisis. But Intel has a long history of smooth transitions from one leader to the next, and Otellini has been the heir apparent for more than two years. "Bob [Noyce] was the consummate entrepreneur," says Otellini, describing the company's founding chief. "Gordon [Moore] was the genius. Andy [Grove] was the management guru. Craig [Barrett]'s legacy was building our manufacturing facilities in the middle of a downturn." Of himself, Otellini says, "I'm the product guy." The implication: clever product design and planning can help guide Intel out of the wilderness.

So far, at least, that emphasis has worked wonders. Otellini, the first nonengineer to helm Intel, has been stressing consumer-friendly products over speedier chips in his speeches for the past four years (he calls the strategy by the awkward name "platformization"). He put the plan to work in 2003 with another of his pet projects--the Centrino--a set of chips specifically designed for wi-fi-enabled laptops. For wi-fi capability, all you really need is the Pentium M, the chip at the heart of Centrino, but Otellini wanted to sell a bundle of chips along with it that would help maintain a laptop's battery life (not to mention Intel's bottom line). Against the wishes of his engineers, Otellini held back the launch of Centrino until the full chip set was ready. The plan worked. Intel has sold more than $5 billion worth of Centrino chips around the world, helping the company hit a record $34.2 billion in revenue by the end of 2004, missteps notwithstanding.

Today, according to Mercury Research, Intel chips are inside 87% of laptop PCs. And in February 2005, Centrino got an upgrade to help it run music and graphics better--stepping onto graphics chipmaker NVidia's turf. With successes like that, it's no accident that Otellini is respected by Intel insiders as a steady hand--a welcome change in a company famous for its bitter boardroom battles. "In the Andy Grove era, it was very raucous," says Andy Bryant, Intel's CFO. "It was not unusual to have loud arguments in public places. Paul is a firm believer in not winning arguments by yelling or insulting."