Intel Risks It All (Again)

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Photographs by Jim Wright

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Photographs by Jim Wright

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When Paul Otellini, Intel's famously reserved CEO first heard the news, he got quiet. "The madder I get, the quieter I get," he says, an important footnote for any Otellini user manual. He was hushed via press conference by Neelie Kroes, the European commissioner for competition. "Intel used illegal anticompetitive practices to exclude essentially its only competitor and thus reduce consumer choice in the worldwide market for x86 chips," Kroes read last May from the 542-page decision on an antitrust case charging Intel with unfair trade practices. The fine: a record 1.06 billion euros, about $1.45 billion U.S.

Kroes ended pointedly: "Finally, I would like to draw your attention to Intel's latest global advertising campaign, which proposes Intel as the 'Sponsors of Tomorrow.' Their Web site invites visitors to add their 'vision of tomorrow.' Well, I can give my vision of tomorrow for Intel here and now: Obey the law."

For Sean Maloney, then Intel's chief sales and marketing officer, Kroes's parting shot was a cheap one. "That was almost the most emotional thing about the whole day," he says, his face a storm cloud. "We were bracing ourselves for what was going to happen, and then this sarcastic remark." He makes a motion with his hand, a knife twist in the air.

Chipzilla, as Intel's snarkier critics call it, has a decades-long history of high-stakes litigation, first defending against the Japanese in the 1970s, and lately going toe-to-toe against Advanced Micro Devices. It was former Intel CEO Andy Grove -- decidedly not quiet when angry -- who was famous for his "silver-bullet test": If you had only one bullet left for your competitors, which one would you shoot?

But to Otellini and Maloney, who was recently elevated to executive vice president, Kroes's slap about the ad campaign had a particular sting. To be on the losing side of a billion-and-a-half-dollar judgment -- which they are appealing -- is a blow. But to Intel insiders, the ad campaign already signals a new kind of Intel -- no less ambitious, but more collaborative, more sympathetic, more human. And greener too. Their past may still haunt them, but the path they are on is far, far different.

Grove famously bet the company on a new chip architecture in the 1980s; Otellini has bet a now far larger company on at least as dramatic a shift -- without explicitly calling attention to it. Since Craig Barrett term-limited out as CEO in 2005 (Intel chiefs must retire at 65), Otellini has been subtly remaking the company: aligning with Apple, in a step away from the company's PC-only heritage; pushing the Atom mobile chip, in a dogleg pivot from Moore's Law, the founding axiom behind Intel, that chips get exponentially faster; and embracing new territory, new markets, and new ways of playing with others. The goal is to better compete in a world in which computing is everywhere, from laptops to tractors. Maloney, Otellini's right hand, whose sphere grew dramatically in the company's recent restructuring, has been crisscrossing the globe to tap the deep wellspring of cash that is worldwide government stimulus money. And this past winter, Otellini decided to sink $7 billion into U.S.-based manufacturing, just as other businesses outsourced to limit costs.

There is no better prism through which to see Otellini's reengineering -- and his spur to action -- than that ad campaign. "I was seriously worried about the timing," says Deborah Conrad, Intel's branding chief. Launched just a few days before the EU announcement, it is Intel's boldest new marketing effort in 15 years: a series of clever -- and, yes, funny -- commercials emphasizing not Intel's products, but the people who make them. In the first spot, a geeky engineer, the inventor of the USB, struts into a shiny lunchroom and is accosted by fawning autograph hounds and love-struck women. The punch line: "Our rock stars are not like your rock stars." Despite Conrad's concerns, the ad quickly racked up millions of YouTube views, inspiring fans to create T-shirts with the engineer's likeness and prompting a flood of résumés to Intel HR.

For all the economic turmoil, Intel has been delivering: After a brutal 2008, when net income was down 24% from the prior year, the chip maker managed $9 billion in gross revenue for the third quarter of this year, up nearly $1 billion from the previous quarter, beating estimates by a half-billion dollars. Investors are noticing. At press time, the share price flirted with its 52-week high, up 36% for the previous six months.