Intel's Crystal Ball - InformationWeek

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Intel's Crystal Ball

It has been years since Intel was simply a chipmaker. What does the company see itself doing 10 years from now?

Everyone working in technology spends part of the time trying to predict the future. At Intel, it's a full-time job. "We develop technology for markets that don't exist for products that don't exist," Intel president and chief operating officer Paul Otellini says. "It's a daunting business."

And the crystal ball offers a cloudy picture. That's evident from Intel's missteps of the past and its vision of the future. "Ten years ago, we were in the computer business," says Craig Barrett, who's been Intel's chief executive since co-founder Andy Grove handed over the reins in 1998. "Today we're in kind of the Internet business. Ten years from today ... "

Barrett's voice trails off while he thinks about this one. "Ten years out, it could be health sciences," he says. The transistors that Intel makes today are already the size of DNA molecules or viruses. Doctors and researchers can start to think about coupling sensors, computers, and communication capabilities to diagnose and treat diseases on a molecular level. "I would guess in 10 years--a wild guess--that this could be as big to our industry as the PC is today."

Barrett spends a lot of time thinking about the future--and a lot of money trying to anticipate it.

Intel president and chief operating officer Paul Otellini

Intel develops technology for markets and products that don't yet exist, chief operating officer Otellini says

Photo by Angie Wyant
Today, the world's largest semiconductor manufacturer drives near-term advances in computing and communications through a corporate culture that fosters innovation and rewards risk taking. The company's goal is to create a digital foundation that both businesses and consumers can benefit from. To accomplish that, Intel realized years ago it had to look beyond the chip. "Our view has evolved from, 'How do you build a faster microprocessor?' to, increasingly, looking at everything that goes around microprocessors," Otellini says.

Intel also is willing to change when the marketplace tells the company it has made a bad bet. Last week, Intel said it would start incorporating 64-bit capabilities into its 32-bit chips, rather than try to push customers to adopt its 64-bit Itanium microprocessor.

One reason Intel has been so successful is that it focuses on how computer systems are developed, rather than just on chips, says Nathan Brookwood, principal analyst for research firm Insight64. "They felt they needed to have more of a system view, and it has served them well," he says. "It's real tough these days to get people excited about gigahertz."

Intel is still focused on the business-computing market, as it tries to move mainstream computing into the 64-bit world (see story, The 64-Bit Bet: Itanium Chip Faces Slow Adoption). And it's expanding into markets overseas, where there's still room to sell new PCs. But those efforts aren't likely to produce the next big thing, the new technology and markets that will fuel the kind of growth Intel is used to. Last year, the company had a profit of $5.64 billion on revenue of $30.14 billion, up from a profit of $3.12 billion on revenue of $26.76 billion in 2002.

One can get a hint as to how Intel sees the future by looking at where it puts its money. Since 2001, Intel has spent $15.7 billion on new production facilities and IT for its 79,500 employees worldwide. One big hint: More than 80 of the company's sites, including a factory in Rio Rancho, N.M., have deployed wireless networks for internal use.

Intel spends a lot on research. Since 2001, it has invested $12.2 billion in research and development. This year, it expects to spend $4.8 billion on R&D, up from 2003's $4.4 billion.

Intel plans to invest $200 million this year in emerging companies developing technologies to create networked homes that let people access music, photos, and other digital content. Last year, the company's Intel Capital investment arm handed out hundreds of millions of dollars to companies such as DRAM makers Micron Technology Inc. and Elpida Memory Inc. The fund also has invested in BridgeCo, a Swiss designer of low-cost chips for linking home devices, and Entropic Communications Inc., which designs chips for home-networking systems over standard coaxial cable. Another investment, Musicmatch Inc., sells software for recording, organizing, and playing music on digital devices.

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