As Profit Soars, Intel Celebrates 35 Years - InformationWeek

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7/15/2003
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As Profit Soars, Intel Celebrates 35 Years

On the day it reported that second-quarter profit doubled from a year earlier, the chipmaker marked a milestone by burying a time capsule containing cutting-edge Intel products of today, company paraphernalia, and items from various Intel facilities.

Intel focused squarely on the future while reminiscing about the past during a ceremony Tuesday celebrating the 35th anniversary of the company founded by Gordon Moore and the late Bob Noyce. The company marked the milestone by burying a time capsule containing cutting-edge Intel products of today, company paraphernalia such as the Intel Acronym Dictionary and the 2003 new employee handbook, and items from various Intel facilities.

Moore, who retired from the Intel board in 2001, joined CEO Craig Barrett, chairman Andy Grove, and president Paul Ottellini in marveling at how things have changed since Intel's early days, when the worldwide market for semiconductors was $1 billion, an amount Intel now does every couple of weeks. Addressing a group of more than 100 longstanding employees, most of whom have been with the company at least 20 years, Moore and company predicted that today's technology will look as antiquated when the capsule is unearthed for Intel's 50th anniversary as the company's early products appear today.



In fact, Moore suggested that a reminder of those early technologies would have provided a welcome glimpse of just how far Intel has come. "I suppose if Intel had a sense of history, we'd be digging up a time capsule today rather than burying one," he told the gathered employees. Ottellini noted that 15 years ago, in 1988, Intel shipped 9 million units of its 25-MHz 386 microprocessor and had yet to produce a chip containing as many as 1 million transistors. Today, he said, Intel is selling chips that exceed 3 GHz in processing power, and it's packing nearly 500 million transistors on a single chip.

Such advances are a source of pride for employees such as John Crawford, Intel fellow for the company's enterprise platforms group and a soon-to-be 25-year veteran of the company. Pointing out that Intel's first microprocessor, 1971's 4004, had just 2,700 transistors, Crawford said he expects the company to pass the billion-transistor threshold in the next couple of years. There's no telling what barriers Intel will break before it reopens the time capsule in 2018, he said. "Those state-of-the-art products being buried in there will look like Model T's."

Moore said that he and Noyce never thought about whether they were building a company that would survive decades and become the dominant force in the semiconductor industry. Rather, he said, they simply thought about survival. "The closest thing we had to a business plan was a goal of getting to $25 million in revenue within five years." They exceeded that goal and then some, raking in $63 million in year five.

And the money continues to roll in. The company said Tuesday that stronger-than-expected demand for microprocessors sent second-quarter profit soaring.

For the three months ended June 28, Intel earned $896 million, or 14 cents per share, on sales of $6.82 billion. That compares with a profit of $446 million, or 7 cents per share, on revenue of $6.32 billion in the same period last year.

The world's largest chipmaker also said its investments in research and development during the three-year-long downturn are starting to pay off.

Intel forecast third-quarter revenue of $6.9 billion to $7.5 billion. It also raised its 2003 research and development spending target to about $4.2 billion from $4.0 billion and said it expects a loss of $25 million in equity investments and interest. It left unchanged its 2003 capital spending target of $3.5 billion to $3.9 billion, which is down 17% to 25% from last year's $4.7 billion.

As the world's largest maker of semiconductors, Intel is considered a bellwether for broader technology investment. The chip industry is forecasting global growth of 10% this year, but investors have sent shares sharply higher in anticipation of improved margins and better results. The company's stock closed at $24.10 on the Nasdaq Stock Exchange on Tuesday, up 8 cents on the day. Intel's share price is up about 44% since the start of the year, outperforming both the Nasdaq Composite Index and the S&P Index.

Moore and Noyce left Fairchild Semiconductor in 1968 and each invested $245,000 in their chip-making venture. Moore recalled Tuesday that he and Noyce each had planned to invest $250,000 but agreed to make room for a $10,000 investment from legendary venture capitalist Arthur Rock, who eventually raised another $2.5 million in the company's first round of equity financing.

When asked what he expected in the next 15 years, Moore said only that he didn't think there'd be a sea change in the industry: "I'm skeptical of any of the new ways of computing replacing the way we've been doing things."

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