Inside Intel

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Competitors keep nipping at Intel's flanks. Longtime rival Advanced Micro Devices Inc. in 2003 launched its Opteron and Athlon 64 chips, outgunning Intel in both raw power and lower power consumption. AMD's market share rose to 17.8% last quarter, up from 16.6% in early 2003, and some analysts predict it will gain more until Intel fields competitive chips in late 2007. AMD CEO Hector J. de Ruiz equates Intel's position with that of American auto makers, scrambling to find innovation even as consumers flock to Japanese rivals. "People are smart enough to pick quality when given a choice, and calling something a platform doesn't guarantee quality," Ruiz says.

In the cell phone market, Texas Instruments and Qualcomm Inc. have held fast against Intel's incursions. Intel Executive Vice-President Sean M. Maloney once wore snowshoes to a company sales conference to illustrate the deep slog. In 2006, AMD and TI plan to field their own chip platforms aimed at capturing some real estate in the digital home.

So Otellini is shaking things up throughout the company. In addition to the reorg, he's making big changes in the way products are developed. While in the past engineers worked on ever-faster chips and then let marketers try to sell them, there are now teams of people with a cross-section of skills. Chip engineers, software developers, marketers, and market specialists all work together to come up with compelling products.

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One example of the new approach is Bern Shen. A doctor who practiced internal medicine for 15 years, he joined Intel three months ago to help develop technologies for digital health. He works with Intel's ethnographers to figure out which technologies might help in monitoring the vital signs of the elderly or tracking the diet of people with Alzheimer's. "The fact that they hired me is an indication of the new Intel," he says.

Otellini is convinced such collaboration will lead to breakthrough innovations. He imagines a day when people will use Centrino laptops to watch live TV on the subway or when kids will be able to download Spider-Man 3 to their home theater on the same day it's released worldwide. Shen's work could lead to Intel technology that allows the elderly to keep living at home, even as data on their vital signs are zapped to doctors several times a day. "This is the right model," Otellini says. "Now it's just a matter of playing it out."

If the world buys Otellini's ideas, industries from Hollywood to health care could be turned upside down. Media and entertainment may be forced to rethink their business models. The health industry could be transformed, as doctors diagnose or even treat patients remotely. "The most important thing about Intel is that they've got the vision," says Russ Bodoff, executive director of the Center for Aging Services Technologies (CAST), a coalition of 400 companies, universities, and hospitals. "They are pushing some very innovative approaches, in areas that relate to dementia, Alzheimer's care, and Parkinson's disease."

The ultimate goal: to provide the manufacturers of everything from laptops and entertainment PCs to cell phones and hospital gear with complete packages of chips and software. The template is Centrino. When Otellini was leading product planning in the core PC business from 1998 to 2002, he decided that rather than roll out just another fast processor, he would bundle it with a relatively new wireless Internet technology called Wi-Fi. The combo made it a breeze for people to connect to the Net from airport lounges and coffee shops. Backed with an initial $300 million marketing campaign, Centrino notebooks became an instant hit, revitalizing the PC market and persuading consumers to snap up the higher-margin products.

CONTINUED : Now, a giant step

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