Sample Presentation

1. Sample Presentation

2. Who is Intel? • World’s largest producer of semiconductor microprocessors • Tremendous growth under Andy Grove as CEO • Craig Barrett became CEO in 1997

3. Latest Annual Revenue Intel & Its Competitors 1, 3, 5, 10 yr. Growth in Revenues

4. PC Components • 84% market in PC processors • 100% of profits • 90% of revenues • Growth in Processor market slowing Down

5. Intel & the Changing Landscape • PC at the center of computing universe in the 90’s • Next decade INTERNET IS IT! • Implications: Old rules of Computerdom • no longer hold

6. Transition-Related Bumps 8% compound growth rate over the past two years Revenue growth slowed to 5% from 30%Blunders in 1999: • chipsets delivered months late • embarrassing design bugs • supply shortages

7. PC Pothole • Earnings declined for the 1st time in a decade • Low Cost PCs • Stock down 30% • and off its peak for • most of 1998 • Industry Consolidation

8. Changing PC Dynamics & Intel Intel Assumption: Customers would clamor for more power to run fatter software programs Reality: Customers wanted cheap PCs to go online. Competitors grabbed 20% of the market share in 1997 (highest in half a decade) Previous Corporate Mission: Leading Purveyor of PC technology Existing Corporate Mission: Provide Building Blocks for the Entire Net Economy

9. The Creosote Bush • Drips poisonous oil, kills everything around it • Dominant microprocessor strategy was Intel’s creosote bush • No other businesses could sprout around it

10. Microprocessors Intel at Crossroads, Again?? Business Goes To New Heights Inflection Point Valley of Death Memory Chip Business Business Declines 1985

11. Internet appliances Intel at Crossroads, Again?? Business Goes To New Heights Inflection Point Valley of Death Microprocessors Business Declines 1999

12. Responses to Crisis • Copy Exactly • segment the microprocessor market • reorganize • Think big, broaden the pond, 10X Rule

13. Objectives • Growth Rate 15-20% a year • New businesses to be No.1 or No. 2 • Grow faster than the industry • Technology leader • Profitable

14. Copy Exactly • Every plant is identical –Down to the colors of paint • easy to roll-out new production Techniques • dramatic Boost in productivity & Quality

15. Segment the Microprocessor Market • Celeron: Inexpensive PCs • Pentium III: Middle Tier of Market • Xeon: High-Powered Servers and Workstations Results: Celeron market share Up from 30% to 62% 60% gross margins Revenues from Xeon chips to double

16. Reorganize Dismantled previous centralized management structure Break Intel into five groups and the managers of these groups report directly to him • Networking Chips • Communication Products • Computer Processors • Information Appliances • New Business

17. Think Big, Broaden the Pond, 10X Rule Seminars for top 400 Managers Day 1: Develop and nurture an entrepreneurial spirit Day 2: Disruptive Technologies Day 3: Business Ecosystems

18. Develop and Nurture an Entrepreneurial Spirit Thinking Green: figure out how to grow new businesses in the shadow of the “creosote bush” OLD NEW

19. Disruptive Technologies Cheap steel reinforcing bars (rebars) Dismissed as insignificant by industry giants Rebar companies nibbled their way into the market for higher value steel PCs and mainframes Japanese automakers and small cars

20. Digital Rebar • Cheap PCs could nibble up the high end computers • Aggressive Celeron marketing even at the risk of cannibalizing sales of pricier chips • Intel Capital • Opening of the minds

21. Business Ecosystems • Construct new webs of relationships • Help seed emerging business ecologies • Invested $6 billion to acquire companies • Providing seed money of more than $1.2 billion

22. Think Big, Broaden the Pond, 10X Rule 1. Intel Capital • Launched in 1991 • To invest in companies that created • “waves of excitement” • To expose the company to every facet • of the Internet economy

23. Think Big, Broaden the Pond, 10X Rule 1a. Intel Capital • Fund has increased from $300 million • in 1997 to $1.2 billion in 1999 • Has stakes in more than 350 software • and internet companies • Notable hits: Red Hat, Inktomi, eToys • Holdings valued at more than $8.2 billion • $327 million in pretax income

24. Think Big, Broaden the Pond, 10X Rule 2. New Business Group • New rules for funding new projects • No more tight budgets • No more rigorous reviews of • internal startups • Similar to venture-capital financing • Launched about 25 seed projects • Spent more than $50 million on these projects

25. 2a. New Business Group • Web-hosting for clients (Citigroup) • Vivonic: digital handheld health planner • PassEdge: technology for protecting digital content • Installing 3,000 information terminals on the back of seats of Madison Square Garden • Equip doctors with secure Ids to encourage • online medicine

26. Web War New Competitors Unfamiliar Territory VS.

27. Think Big, Broaden the Pond, 10X Rule 3. Information Appliances “Move Intel into the home, somehow” Screen phones E-mail terminals TV set-top boxes

28. Think Big, Broaden the Pond, 10X Rule 4. Communication Products • Home Networking • Broadband Modems • PC-based Telephony • Server Appliances • Ethernet Hubs • Small Networking Switches • Specialized Servers for Web Traffic • and speeding up e-commerce

29. Think Big, Broaden the Pond, 10X Rule • Networking Chips • Fastest growing category among chips • Used in modems, network • interface cards, switches, • and routers • Acquired a lot of companies • Level One Communications • ($2.2 billion) • NetBoost ($215 million) • Softcom Microsystems ($149 million)

30. The Future of Intel • Many skeptics • The creosote bush is no longer thriving at Intel • Enormous potential for • growth • Moving in the Right Direction??