Andy Grove - Richard Tedlow by Must Read Summaries

Author:Must Read Summaries
Language: eng
Format: epub
Publisher: Primento Publishing

Sixth chapter

“We’re in the business of revolutionizing society. This is a profit-making organization. That’s the way we intended it ...and that’s the way it is!”

– Gordon Moore

By the mid-1980s, the Japanese were really starting to make their presence felt in the semiconductor industry. They were coming to the market with superb products, factories which could produce huge volumes and access to very low cost operating capital. They were also aggressive marketers who were prepared to quote 10-percent below whatever price Intel or any other memory producers were charging. Andy Grove was quite open in describing their threat to Intel’s business as “scary”.

These developments generated lots of internal debate at Intel. On the one hand, some people wanted to build a gigantic factory and take on the Japanese head-on. Others felt microprocessors were growing and were more profitable anyway, so the company should put more emphasis on them. While all of this was happening, Andy Grove said: “We had lost our bearings. We were wandering in the valley of death.”

“At one point in mid-1985, after a year of ‘aimless wandering’, Grove said to Moore, ‘If we got kicked out and the board brought in a new CEO, what do you think he would do?’ Moore immediately replied, ‘He would get us out of memories.’ ‘I stared at him, numb, then said, ‘Why shouldn’t you and I walk out the door, come back, and do it ourselves?’”

– Richard Tedlow

As easy as this decision may look in hindsight, making it happen was intensely gut wrenching for Intel. It actually took about three years for the company to shut down its memory factories, tell its memory customers Intel was exiting the business, let people go and get all its staff up to speed with the changes. Keeping Intel’s top talent and deploying them in developing microprocessors rather than memory chips was a particularly tough assignment for Grove.

When Andy Grove took over as CEO of Intel on April 23, 1987, the computer industry was still dominated by IBM in mainframes and Digital Computer in minicomputers. IBM had sales of $54.2 billion that year and a market capitalization of $72 billion. Intel’s sales, by comparison, were $1.9 billion and its market capitalization was $4.3 billion. Yet, in spite of the fact Intel’s entire market capitalization was less than the $5.3 billion in profits IBM earned in 1987, Intel was just about to figuratively poke IBM in the eye.

“During the eleven years that he was Intel’s CEO, Grove made his share of mistakes. He was also lucky, making some guesses that could have turned out not as well as they did. Above all, however, Grove was shrewd and astute about the one issue concerning which he had to be right. Grove understood that ‘The PC Is It.’ This insight should not be taken for granted.”

– Richard Tedlow

The strategy that Andy Grove then put in place for Intel to move forward in the new era of being microprocessor-centered was easy to describe even though difficult to execute.

“We learned

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