Life after Barrett will not be easy for Intel

When Paul Otellini takes the reins as Intel chief executive officer in May, he’s going to face some big challenges. He will have to deliver on some tough growth targets, as well as continuing to position Intel as a serious player in the consumer electronics marketplace, a move that will bring it up against some of the most brand aggressive companies in the world. Who says it will be difficult? The man who’s doing the job right now.

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By  Peter Branton Published  April 3, 2005

Introduction|~||~||~|When Paul Otellini takes the reins as Intel chief executive officer in May, he’s going to face some big challenges. He will have to deliver on some tough growth targets, as well as continuing to position Intel as a serious player in the consumer electronics marketplace, a move that will bring it up against some of the most brand aggressive companies in the world. Who says it will be difficult? The man who’s doing the job right now. “The biggest challenge that we [Intel] always have is growth and it is important to us to demonstrate to the world and to the financial community that we have continued prospects for substantial growth,” said Craig Barrett, reigning Intel chief executive officer, in an exclusive interview with IT Weekly. “We’ve said for the last several years that we have internal targets for growth of 15% or so to the top line and hopefully better than that for the bottom line. It’s important for Paul and the company to continue to show that growth and that growth potential,” he said. “That’s part one, part two is to continue to work in the convergence of computing, communications and content space.” According to Barrett, this means Intel’s push into consumer electronics, plus a whole lot more. “It’s the wireless plus the computing plus rich content, and the technologies that allow that to happen whether its dual-core, multithreading or more cache, greater I/O (input/output) capabilities, all of those things,” he said. Barrett was in the Middle East last week for a whistle-stop tour, which took in Dubai and Abu Dhabi in the UAE, as well as Egypt. “I personally like to go see what’s happening wherever we do business, and what the local cultural social attributes are that drive usage of information technology,” he said. “We do business in just about every country in the world so I can’t visit every country in the world but I try to visit about 30 every year,” he claimed. Of course, Barrett’s interest in the region is more than just simple curiosity or a really strong urge to travel: for Intel to deliver on that 15% growth per annum, it can’t just rely on its traditional and now maturing market places. It needs to target emerging markets. These are the markets, including the Middle East, where the economies are not so well developed as their counterparts in the Americas and Europe, but which want to play catch-up. Taken together, the emerging markets now account for as much as 40% of Intel’s total business, and it is also the fraction that is growing the most, Barrett claimed. “They [the emerging markets] are significant markets for us and growing much faster than the established markets. Western Europe, Japan and the US are still our biggest markets, but they’re not growing nearly as fast as the emerging markets are,” he said. Which doesn’t mean that the emerging markets are necessarily growing as fast as Barrett, or Intel, would like. Last week’s tour was an opportunity for Barrett to bang the drum for the benefits of IT to a nation’s economy, and it certainly wasn’t an opportunity spurned. “The GCC needs to invest in ICT as the next natural resource,” he told an audience of government leaders, education officials and business executives at a conference in Dubai last week. Later he declared: “The challenge here in the Gulf is to continue to invest in technology and to invest in your future.” In fairness, Barrett is a passionate believer in the importance of investment in technology, not just for the GCC countries but for all countries — including his own. Barrett has been a strong critic of US failure to invest adequately in research and development (R&D), and said the Middle East would do well to learn the importance of IT as a key growth driver. “As the world moves more and more towards knowledge-based economies the whole concept of new ideas, intellectual property and so on are going to be the driving force for wealth creation. That comes out of R&D and countries that invest effectively in R&D should reap the benefit, they should be more competitive,” he said. “There’s lots of ways you can measure technology investment, you can measure it in terms of PC penetration, internet penetration, technology in schools, in the healthcare industry, lots of ways that you can measure it,” Barrett added. “If you look at where the US, Japan, Western Europe are compared to the emerging markets, you see quite a differential. In this area of the world, PC penetration is below the double-digit range, and internet penetration is also below the double-digit range, quite substantially different than you’d find in the US or Europe, so you can suggest there’s lot of opportunity there,” he claimed. ||**||Investment|~||~||~|Part of the purpose of Barrett’s trip was to discuss a series of initiatives with various government representatives, including Intel’s work with Saudi Arabia on its ‘PC for Home’ project. Intel is keen to see similar projects elsewhere in the region. “These initiatives can be very powerful,” Barrett said. “There are lots of ways that governments can make technology available to the individual. You can put community centres in place, and that happens in a lot of countries, or you can make it easy for people to buy computers. There are a number of countries around the world that are running these programmes and I think they can be very effective at expanding the reach of technology to the home.” The home is very much the place where Intel wants to be today with the company keen to be seen as a consumer electronics player, operating in the converged space of computing, communications and content. “All of the work that we do with the computer industry, the software industry, the consumer electronics industry... all of that good stuff is basically designed to bring computers more into the consumer side and also to move that strong digital architecture in computers into the architecture of consumer electronics,” Barrett said. Such a move will see Intel looking to partner, and potentially having to compete with some well-established consumer electronics firms. However, Barrett is well aware of this: “There are some big companies in that space, the Sonys, Samsungs and others, but I look at them as potential customers rather than as competitors,” he said. “There are obviously companies that supply integrated circuits and such but we’ll bring the strength of providing digital expertise to what was an analogue market before,” Barrett added. Although there are definitely some big challenges for Barrett’s successor, there are clearly some big opportunities for Otellini as well. However, he won’t have to do it all alone as Barrett isn’t done quite yet. “I’ll stay interested in a couple of areas,” he claimed. “I’d like to continue to stay involved, working with Paul, but continuing to focus on our emerging markets and our international markets.” It may be his last visit to the region as chief executive officer, but we may not have seen the last of Craig Barrett. ||**||

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