Inside Intel

Intel has tried entering new markets in the past, particularly under Barrett. Yet it always treated them as tangential and never let them detract from the core processor effort. Not anymore. Otellini, who took over as CEO in May, has reorganized the company top to bottom, putting most of its 98,000 employees into new jobs. He created business units for each product area, including mobility and digital health, and scattered the processor experts among them. He has also added 20,000 people in the past year. The result? Intel is poised to launch more new products in 2006 than at any time in its history.

Intel's culture is changing, too. Under the charismatic Grove, who was CEO from 1987 to 1998 and then chairman until 2005, the company was a rough-and-tumble place. Grove's motto was "Only the paranoid survive," and managers frequently engaged in "constructive confrontation," which any outsider would call shouting. Engineers ruled the roost. Grove and Barrett also instituted the practice of doling out cash to PC makers for joint advertising, which Intel rivals have alleged blocks them from some markets.

Otellini is more diplomatic, partly by nature, partly by necessity. The intensely private 55-year-old rarely reveals irritation -- and then, with a slight frown. His management mantra: "Praise in public, criticize in private."

He's also is the first non-engineer to run the company. Otellini studied economics in college at the University of San Francisco and then joined Intel in 1974, straight out of B-school at the University of California at Berkeley. Many of the new employees he's bringing on aren't typical Intel hires either. They include software developers, sociologists, ethnographers, even doctors to help develop products. He lays particular emphasis on marketing expertise because he thinks the only way Intel can succeed in new markets is by communicating more clearly what the technology can do for customers. "To sell technology now, you have to do it in a way where it's much more simple," says Otellini. "You can't talk about the bits and the bytes."

The changes have created some angst among employees. In particular, many high-level engineers working on PC products feel they've been stripped of their star status. "The desktop group used to rule the company, and we liked it that way," says one former chip designer, adding that some engineers now feel "directionless." Other employees are simply uncomfortable with the new emphasis on marketing. "There definitely are people who are highly skeptical, who think this is all fluff, all just gloss -- that if you make good technology, you don't need the glitz," says Genevieve Bell, an in-house ethnographer who researches how people in emerging markets like China and India use technology.

Yet Intel and Otellini aren't shying away from glitz these days. For its bash at the Consumer Electronics Show, the company has booked the hip-hop band Black Eyed Peas, with its hit Let's Get It Started. Beforehand, Otellini will unveil the new Intel during his keynote speech. It starts with a whole new look for the 37-year-old company. The Intel Inside logo will disappear, replaced by an updated Intel logo with a swirl around it to signify movement. For the first time since the early 1990s, the company will add a tagline: "Leap ahead."

Meantime, the famous Pentium brand will be slowly phased out. In its place: a troika of brands, two of them freshly minted. Viiv (rhymes with "alive") is the name of a new chip for home PCs, designed to replace your TiVo, stereo, and, potentially, cable or satellite set-top box. It will be able to download first-run movies, music, and games, and shift them around the home. Intel also will launch a set of notebook PC chips under the three-year-old Centrino brand, as well as so-called dual-core chips, which will put two processor cores on one sliver of silicon. The new brand "Core" will be put on products that don't meet the specifications of the Viiv or Centrino platforms. The effort is winning high-profile support. On Jan. 10, Apple Computer Inc., which has never used Intel's chips before, is expected to be one of the first companies to offer products with the dual-core chips.

One of Otellini's key steps in all this was hiring Kim away from Samsung Group a year ago. Kim had led Samsung's marketing since 1999 and helped build the Korean maker of consumer electronics, cell phones, and computer chips into a hot global brand. But Otellini didn't just swipe a major talent away from the company that's increasingly seen as Intel's prime competitor. By hiring an outsider who reports directly to the CEO for the first time in Intel's history, Otellini also got someone who could play bad cop and push through unpopular changes when necessary. Rank-and-file employees do grumble about Kim and what they consider his autocratic style, but he makes no apologies. "I tell people they're not just about making silicon. They're helping people's lives improve, and we need to let the world know that," says Kim.

Yet it's a daunting task, especially for a company that has never had much success outside the computer industry. Companies that have been good at transforming themselves, from Nissan and Apple to Texas Instruments, typically need a crisis to precipitate change, says management expert Jay R. Galbraith of Galbraith Associates. And although Intel is facing a possible slowdown, it's still pulling in nearly $1 billion a month in profits. "Change is really hard when you're solidly on top," says Galbraith. "He'll have to bring in new people who have new skill sets."

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