Intel to undergo major reorganization

11,000 people to be affected by changes in company structure, strategies

28 April 2000 SGT - In a dramatic move to address some of the problems that have plagued the company over the last year, Intel Corp. is undergoing a major reorganization, an Intel official confirmed today.

Pat Gelsinger, vice president and general manager of Intel's desktop products group, discussed the changes in an interview following his keynote address at Windows Hardware Engineering Conference (WinHEC) in New Orleans.

With the reorganization, Gelsinger assumes the title of chief technology officer and will oversee product implementations across all business groups.

Specifically, Intel merged its Architecture Business and Microprocessor Products groups into a new division called Intel Architecture Group, which will be jointly managed by Paul Otellini, executive vice president, and Albert Yu, senior vice president.

IAG will be responsible for development of chips, chipsets, motherboards, systems and related software for servers, workstations, desktop and mobile PCs. Research and development for the two divisions have also been consolidated, Intel officials said.

Within IAG, Intel has also created a group, comprising 1,000 employees and funded with a $100 million, to focus on tying together products and services aimed at Internet service providers and customers.

The move, which Intel has been looking at for the last 45 to 60 days and will affect 11,000 workers, Gelsinger said, is being made to address the company's past missteps as well as the changing marketplace.

"We've been seeing the need for these actions for a while," he said. "We've been orienting our programs more to delivering solutions, put in place the processes to better communicate with our customers and align our roadmaps. We've been addressing those issues through incremental process and organizational improvement. I think it now became very clear that this is the way of the future."

Among the criticisms Intel has been facing is its inability to supply the demands of its major suppliers, especially for the Celeron and Pentium III processors. In February, Intel said it was ramping up its production and predicted it would be able to meet supply needs by the end of the first quarter, but earlier this month company officials pushed back that time table to June.

Gelsinger blamed the problem on higher than expected demand for chips that go against traditional supply and demand models, as well as a failure of industry analysts to accurately forecast growth. But he did note that he believes business customers will be able to obtain the products from Intel they need.

"I think IT customers will get what they want this year. We expect overall tightness because the demand is so strong, but we're very comfortable that IT will get what they want despite the overall tightness," he said.

But while the Intel official blamed unexpected market conditions for some of its troubles, he also admitted that the company may have tried to do too much, too quickly over the last year.

"We bit off an awful lot last year, developing Timna, Willamette, Itanium, ramping supply, platform conversions on BX motherboards to 800 chip set families, RDRAM, new graphic ports. Just look at the set of things that we undertook in the last year, we simply bit off more than we could execute," Gelsinger said. "Now we've now reoriented ourselves to take on less and execute more and better, and we think this reorganization will also help us in some of those areas."

Gelsinger described his new role as fundamentally similar to his previous position overseeing the desktop products division. "You can argue that I've have been acting CTO over desktops for a while, you know coming from technology background and driving a lot of initiatives and things like that, now I will be playing that role formally across all of our business units," he said. "I now will be as equally worried about server technologies and future directions as I am about mobiles."

Gelsinger said he also brings his own special skills to the job. "The other thing I bring is my unique focus on solutions," he said. Nobody at Intel before said how all of the pieces fit together. If Intel was going to deliver, let's say, a new scalable WAP application that worked from mobile through desktops with the right back-end infrastructure in terms of servers and I/O systems, nobody before had that job. Everybody just had a piece of it. Now I have that job to look over that whole set."

Going forward, Intel will focus on becoming the "building block supplier for the internet economy," Gelsinger said. The company will be divided into addressing four areas: client solutions, server solutions, networks and services.

Some critics contend Intel's troubles resulted after the company was distracted from its core processor business as it sought to rapidly develop its networking and communications group. Over the last 18 months, Intel has spent more than $7 billion acquiring about a dozen network and communications companies.

Gelsinger contended Intel's moves go hand-in-hand with its e-home and e-business initiatives and address the demands of the market for more complete solutions. As it continues to adapt to changing market demands, he said it's difficult to predict where Intel will go in the future.

"It's very hard to say exactly where we'll be in three years. I mean describe to me what the Internet economy will look like in three years," he said. "We're rapidly embracing and respond to some of these changes introduced by the Internet into all our businesses. The other thing is taking the e-home and e-business visions that we're describing, they're Intel visions, and try to drive the business and consumer solutions."