July 27, 2004 4:10 PM PDT

Intel's CEO wants an employee attitude check

Although Intel has done well financially so far this year, the chipmaker's chief executive, Craig Barrett, still isn't satisfied with its track record following numerous product delays that have affected its plans. And he's ordering some changes.

Barrett, who is known to speak his mind on topics ranging from politics to the PC industry, turned his attention to Intel's own employees last week in a memo that addressed the string of product delays and production problems. Parts of the memo were viewed by CNET News.com.

"I recently spoke to Intel's senior managers about our execution," Barrett said in the memo, e-mailed to company employees on July 21. "Yes, I spoke bluntly and directly, because to me, there is nothing more essential to Intel's success than its culture of operational excellence and our performance to values such as discipline, results orientation and customer orientation. I spoke bluntly also because it is part of our culture to address our problems with honesty and to resolve to fix them."

"Our business is complex, and we have set high expectations for ourselves. Therefore, it is critical that everyone--beginning with senior management but extending to all of you--focus intensely on actions and attitudes that will continue Intel's strong track record of technology leadership leading to outstanding company performance and satisfied customers," Barrett said in his memo. "Finally, I was direct because I wanted senior managers--whose job it is to set expectations to all of you and to provide direction and coaching--to have no doubt about the need to improve our performance."

Earlier this month, Intel pushed back the release of Alviso, a chipset for Pentium M notebooks, citing design problems. The delay, which will keep Alviso notebooks from hitting the market until early next year, is the second major notebook product delay in 2004. Intel also delayed the launch of Dothan, its latest Pentium M notebook processor, from January or February until May.

The chipmaker also had to do extra design work on Prescott, its latest Pentium 4 chip. Prescott shipped on time, technically--it went out to PC makers before Intel's goal, the end of 2003--but it was not available in systems until February. Even then, it was hard to obtain, PC makers said.

Finally, a manufacturing problem had Intel recalling batches of bad controller hub chips, which affected the launch of its Intel Express 900-series of desktop chipsets, a product that one Intel executive said is one of the company's most important products that Intel has introduced in the last 12 years.

"There are many reasons for these, but in the end, the reasons don't matter, because the result is less satisfied customers and a less successful Intel. I believe, as you do, that this is not the Intel we all know and that it is not acceptable," Barrett's memo continued.

Money matters
None of the delays or manufacturing problems was considered by analysts to be of disastrous proportions, and none is likely to hurt Intel's long-term financial performance. Nonetheless, they hampered some of the company's most important product launches in years and caused Barrett to take up the topic with Intel's senior managers.

"By many measures, Intel is performing well," he wrote. "This past quarter, we did achieve $1.8 billion in profits (up nearly 100 percent from 2003) as well as higher revenue growth than you'd expect for this time of year, and we gave an outlook for $8.9 billion in revenue for the next quarter--an all-time record, if we reach it. But this just makes our recent problems all the more disappointing--because of what we could achieve if Intel were performing well in all major aspects."

In order to address the problems that have cropped up, Barrett said in his memo that Intel plans to change its approach to at product design by adding better checks and balances to help enforce better planning and project management.

Intel is "starting to put in place the indicators, reviews and management attention to start to turn these problems around by ensuring good planning, staffing and program management. This will not be a short-lived focus; we have plans to continue to review expectations and performance in the future," he wrote in the memo.

But that means that Intel's chip delays may not be over with Alviso. Intel has been going back over many of its product designs and schedules, following problems, including the controller hub-manufacturing problem, company spokesman Howard High said earlier this month.

"When that type of thing happens, as a company, we tend to go back and look across all of our key products," High said. "We have a certain reputation we want to maintain in terms of our quality level."

The Alviso delay was also an issue of quality, leaving Intel no choice but to push back the chipset's release, therefore delaying PC makers' plans as well, Dean McCarron, an analyst at Mercury Research, said in a recent interview.

But "the one common thread to all of this is that they're not letting a part out until it's baked," McCarron said.

7 comments

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A good Start!
These types of problems are almost always the fault of at least a few poor to bad managers. Let's hope the "corrections" focus where the actual problem(s) are!
Posted by Aardasp (31 comments )
Reply Link Flag
You Can't Lead Your Men from the Rear
Nobody gets up in the morning and says to themself, "How can I **** off my boss today? How can I do a bad job?"
Human nature: Everyone wants to do the right thing and succeed.
If things go wrong and plans misfire, look in the mirror Craig. Where were you to mentor your department heads as schedules started slipping? How come YOU didn't make sure plans were on schedule -- long before they slipped?
If you peak under the hood you will surely find plenty of people in the trenches that were aware of the slippage, but, as in most large corporations, they were "dumbed down" and beaten into complacency -- too afraid of retribution to speak up. How come you weren't tuned in sooner? Don't blame the rank and file. Get a clue. Leadership starts at the top and in the front Craig. You can't lead your men from the rear!
Posted by (2 comments )
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Drucker Should Be Mandatory Reading
Drucker wrote more than 30 years ago to NOT do exactly what Intel CEO has done. Communicating down in this manner will create cynics and should never be expected to work in the first place. This is the translation of the memo:

1. We do not understand why we started to underperform
2. We do not want to find out
3. We expect our shareholders (us being among them) to be upset about the performance
4. We as management do not want to be on the receiving end of the shareholders' ire
5. Therefore, we will double team on the people in the trenches with the assumption that that's where the rot is
6. Dear workers, we the top management are not happy. Your job is to make us happy.
7. We do not understand what you need to do to make us happy and we do not think that you do either but we want you to figure it out
8. Once you figure it out, don't tell us; just do it
9. Dear shareholders as you can see I am just as upset as you are. I am on your side.
Posted by Erkut (7 comments )
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Barrett is an idiot
As a former Intel employee, I can tell you, Craig Barrett is the worst thing that ever happened to the company. His mismanagement is truly incredible. First, he blew billions of dollars on projects and acquisitions during the boom, projects which even the most optimistic analysis should have revealed would never be profitable. Then, as the boom collapsed, he cancelled everything, even the projects which were potentially profitable. He cancelled profitable projects because they weren't profitable enough. He demoralized the employees. He instigated force reduction programs which let the most talented people go, while keeping the political players who were the least productive. Finally, instead of keeping the talented, experienced teams, he's offshored work to foreign countries where he can fail for less.

This latest move reeks of "it's your fault we're not profitable enough". Continually passing the blame.

It's time for Barrett to go. The stockholders and board of directors should have his head on a platter.
Posted by kolding (8 comments )
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MBOs, compensation, complexity
<a class="jive-link-external" href="http://www.mercurynews.com/mld/mercurynews/news/special_packages/8737550.htm?1c" target="_newWindow">http://www.mercurynews.com/mld/mercurynews/news/special_packages/8737550.htm?1c</a>
barrett's compensation growth is typical of high tech execs, and outrageous compared to typical workers. deferred compensation, corporate paid 401k equivalents, ..., stock options are simply stratospheric and in large part encouraging cost reductions overseas... the system is being gamed... overseas .. talent is ramping up...

meanwhile chip complexities, architectural structural densities, 3D parasitics stretch the capacity of the program management and forecasting simulations and tools ... as Intel or AMD or whoever move forward, it's gonna take longer, more redundancy in designs are required..
building designs with more integration and subsystems on smaller footprints are difficult.

to use a static benchmark is silly....and quite unreasonable.
Posted by kurtwestphal (1 comment )
Link Flag
Intel Employees Want CEO Attitude Check
Write that story ...
Posted by (2 comments )
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Follow suit
He's right on the money! Employees make the company what it is. Maybe Dell and Gateway should try that as well. The last Dell rep. told me they couldn't replace a $150 printer even though I spent 200k for servers and desktops. Told me to try Gateway. Gateway rep. said they couldn't help me with a question I had on an older desktop because it had no warranty even though I spent 200k with them for servers and desktops. What a slap in the face. Think I'll switch to IBM.
Posted by mill634 (1 comment )
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