Intel's Long-Term Plan: Spend Money to Make Money

When it comes to economic crisis, grizzled veterans like Intel have stared into the abyss before and lived to tell the tale. We look at how several giants are approaching today's meltdown with distinctive strategies for not only surviving but also thriving.

maloneySean Maloney (left) just wants people to buy things. "The last six months, people everywhere have been scared about what's happening in the world," says Maloney, Intel's chief sales and marketing officer. An ebbing tide--and moribund electronics market--grounds all boats: Intel's first-quarter revenue was $7.1 billion, down 26% year over year.

In addition to our breakfast meeting, Maloney was in town to launch the Nehalem chip (more formally known as the Xeon 5500 microprocessor family) that was targeted specifically to financial services firms. "Think Wall Street is dead?" Maloney told a group of reporters at the relatively upbeat launch part at the NASDAQ market site. In spite of the economic downturn, financial service companies are processing significantly more information than ever. "The volumes aren't going down. In fact, the biggest volume in years was in November," which was a terrible month for the market.

But he says, if there are fewer transactions being completed, but more data being electronically generated while financial services companies look for a buyer or seller, then "faster" becomes an essential tool. "Each trade is now more important. That means you need to run more computer cycles to see what the best angle is going to be. Under almost any scenario, the more computer cycles you are able to run in the tiny fraction of the time you have before you have make a trade decision, it can be very important."

intel xeonThis speaks to Maloney's broader point, that spending is essential in a downturn, especially if you are in a business that relies on technology of your own making, as financial services firms do. In an attempt to get ahead of the game by the next upswing, Intel is doing some spending of its own. After closing some smaller plants, it announced earlier this year that it would invest more than $7 billion upgrading its factories in the United States. "We doubled down on manufacturing," Maloney says. "People said, 'You're insane!' " But Intel's entire competitive advantage--its ability to keep pace with Moore's Law and even exceed it--is in its manufacturing processes. "All our heavy-duty stuff is internal R&D on manufacturing," he says. "We lost that in the '80s and nearly went bankrupt, so it's a fairly fanatical focus for us. Never again."

At the same time, Intel is changing its development model to be more inclusive of customers and their needs. "We make transistors smaller and smaller in 18 months' time," Maloney says, "but we have almost no idea how to do it five years out." That's where customers come in, collaborating with them on chip development. As large institutional clients hired microprocessor-server specialists and started asking for very specific capabilities, Intel responded. For example, the Nehalem EP chip is expected to allow one server to replace nine existing ones and pay for itself in just eight months. "Our job," Maloney says, "is to give them something so wonderful that they'll spend money again."

To read about how Cisco, Corning, IBM, and Intel are weathering the current economic storm, read "Through the Fire" from our June issue.

Read more of Fast Company's Recession Remedy series.

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  • Alisa U

    Hopefully, Intel would be successful in doing this long-term plan. In business world, spending is also an important way to make money, the same thing with lottery game. You need to spend money for the ticket, and then if you were a lucky person, you would be a millionaire if you win the game. The Powerball winner gets a lot of money. The next Powerball winner, and you just can't make this stuff up, will be (they've tracked the ticket) in Winner, South Dakota. (Once again – can't make that up.) Winner, a sleepy town of only 3,000 in a state of under 800,000, is where the wining ticket has gone. Einstein once observed that coincidence is God's way of staying anonymous, but when is coincidence too coincidental? A Powerball winner from Winner, SD, that will get big time debt relief – truth is stranger than fiction.