Barrett: Tech's challenges in government

Intel CEO Craig Barrett: says it's time for the United States to wake up to the new global realities about technology and economics.

Mike Ricciuti
Mike Ricciuti Staff writer, CNET News
Mike Ricciuti joined CNET in 1996. He is now CNET News' Boston-based executive editor and east coast bureau chief, serving as department editor for business technology and software covered by CNET News, Reviews, and Download.com. E-mail Mike.
11 min read
Craig Barrett is on a mission.

To keep Intel at the forefront of the microprocessor business, Intel's CEO poured cash into research and development while institutional investors called for layoffs. That perseverance seems to have paid off. With the tech economy gradually gaining steam, Intel beat expectations and turned a healthy profit during the third quarter.

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Craig Barrett, CEO, Intel

Now, Barrett, who spoke Tuesday at an industry conference sponsored by Gartner, is out to prove that the convergence of computing, communications and digital content will help drive an industry resurgence.

Barrett's speech was also a call to arms. Intel's CEO sees a faulty educational system that does little to teach adequate math and science skills as a major problem the high-tech economy--and the nation--will need to address in the coming years. Among other ideas, Barrett advocates giving foreign nationals who are recent engineering school graduates instant green cards in order to shore up the domestic engineering talent pool.

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While most of the world sees high tech as the leading driver of the economy in the coming years, the United States--and in particular Intel's home state of California--treats the industry as a second-class citizen, according to Barrett.

Coupled with the growth of Intel's business outside of the United States, that's led the company to place a greater value on its overseas operations.

Barrett sat down with CNET News.com editors to discuss global economic issues, along with how Intel will deliver new technologies and why companies should adopt them.

Q: What will Intel have in store to coincide with Microsoft's introduction of Longhorn, its next version of Windows?
A: The aspects of Longhorn are that it is more secure, and we have talked about some of the technologies we are trying to align. And we have talked about some of the other technologies that we want to bring forward in the future. We try to align our capabilities with Microsoft's capabilities to bring to the user.

How much of a sales driver for Intel will Longhorn be?
Kind of tough to say. You are at least a couple of years away from delivery and a lot can happen.

To put it another way, following Moore's Law, what kind of horsepower would be available if you bought a new machine at the same time that the new OS is out?
I think you will see a variety of technologies provided in addition to the standard more clocks or cycles. I think you will see the integration of technologies, whether it's wireless or some degree of virtualization, such as Vanderpool. You will most likely see movement probably beyond hyperthreading into the multiple core situations, which are starting at a high level and are cascading down to the desktop.

And that's within three years?
Well, it's kind of within that two- to five-year time frame.

Will there be enough horsepower at that time for speech recognition?
I'm not sure there is ever enough for speech recognition. We've been talking about speech recognition for 20 years, since Intel built the first digital signal processor. Speech recognition was always the next application, for next year. It's clearly getting better and better, and you can do all sorts of memos--and Andy Grove uses it. So it's getting there. But you assume Moore's Law, processing power, continues to grow, so we are going to double every 18 months or so. In four years you get four times as much as today to do that sort of digital signal processing.

When you are working with Microsoft, do they have a reference platform for the minimum requirements for a 2005 or 2006 system?
Obviously, we share road maps with Microsoft and other people. That benchmark is out there for them. We both have to work in the multiyear lead-time situations. It may take us three years to go from design to bottoms-up product out the door.

What kind of an impact will Vanderpool, which allows users to partition individual chips inside their computers, have when it comes to the marketplace?

I don't want to pick on Bush. I don't think the Clinton administration had a good handle on this either.
It will certainly give users a lot of flexibility to have different profiles on the same machine. If people use it for multiple OSes, running in sync on the same processor, it opens up a lot of different use models, and perhaps competitive models in the marketplace. If you are able to, say, have two OSes running simultaneously, you won't have to rely on a single OS for everything. So you could have Mac OS and Longhorn on the same system, using Longhorn for business stuff and Mac OS for personal stuff. But first you'd need to convince Steve Jobs that it's a great idea. Even more important will be Vanderpool for fault-tolerance. Lots of aspects of that.

Will the consumer market or the business market be the dominant market for Intel in the coming years?
I think that the theme is convergence, and it is equally dominant on both sides.

How do you convince IT buyers, who you said are Intel's weakest market right now, to buy?
I think the world is convincing them of the need to upgrade, and that is the competitive environment. There is a silver lining in this issue of offshore outsourcing and loss of white collar jobs and differential wage rates and competitiveness around the world. The U.S. has been the biggest investor in IT, and it has made us the most productive economy. And if you want to stay in that position, you have to continue to invest. And people are waking up to that. We have to go to them today and say, do you want to do this with 4-year-old technology or today's technology? Does the fact that companies need to spend a larger amount of their budgets on security take away from spending on other areas?
I don't think so. What we spend on security is like a tax. It's the infrastructure. You get benefits from the capabilities. Does the benefit outweigh the cost? I say yes. Security is in the press a lot today, but we will get over that and we will put out better hardware, and Microsoft will put out better software. People will get more intelligent on how they guard against these things. We're still in the infant process on this whole thing. To assume that you are going to stop today because there are new vulnerabilities is kind of naive in my mind. The world is not going to stop. You can choose to, but you will be left behind.

Is there a point at which the security tax is too high?
We're a pretty homogeneous environment at Intel. We're probably as big of a target as any in the world. It's not an unbearable burden for us to carry at this stage. Would I wish to get more net benefit out of this capability to overcome that tax? Yes. Would I stop deployment of new technology? No. Do I like it? No, but we are still learning.

How long before we see the Trusted Computing platform supported on multiple systems?
I think it will take longer than most people anticipate. Maybe in the five- to 10-year range.

What do you say to people who say Intel is out there pushing Moore's Law but have a 600MHz machine and say they are doing just fine?
If you look at the convergence of computing, communications and digital content, and you think 600MHz is enough, that's fine. I'll take my 3.2GHz machine over your 600MHz any day. If I'm into rich content, data mining and multitasking, (I need more).

What's your take on the telecoms? Obviously it's a core part of your business.
I think they are still struggling with two things: the movement to more standard building blocks that will lower the cost of telecommunications. The other thing is the competitive environment. That comes in two categories?-rules and regulations and the battle between the wireline and wireless guys and the cable guys. And you can add voice over IP. They are trying to deal with how to grow if the revenue per user goes down. You grow by adding new services, but you have to do that at the same time that people are coming in and trying to undermine your basic business model. At the same time, the government says that if you make an investment, you have to share. So they are kind of between a rock and a hard place.

Is that stalling that part of your business?
In the U.S. that is stalling. But in China and India there is rampant expansion. They are suffering from overcapacity and investments from the late '90s. That's why the rule of thumb is that the communications sector will improve after the computing sector.

Is Sun Microsystems still viable?
Scott (McNealy) has a parallel on the desktop, and that is Apple. They are sophisticated software companies who are wed to hardware revenues and margins. And they are both wed to proprietary hardware. The question is, what is the business model that you can carry over that is successful? Apple's model has been they're increasingly happy with 2 percent of the marketplace, and they are happy to cede the other 98 percent of the marketplace to other people.

I don't know if Scott is on that same track or not. He has had 10 quarters of decreasing revenues. He is increasingly facing competition from Itanium and the more standard building blocks and at the high end from big-iron companies. So he has to decide whether he is going to be a closed-source, proprietary-limited player, as Apple has decided to do, or he is going to do something different. He is at least using Intel architecture at the bottom of the scale. Customers want Solaris on cost-effective building blocks. We have tried to win designs at Sun, as we do at Apple all of the time. I don't have any unique advice for these guys.

Is Sun still a valuable partner, and will that relationship grow in the future?
I'm biased in this area. I think that SPARC is not a long-term player in this area. To be a long-term player, (McNealy) will have to start to accept product margins that make (Sun's) price/performance more attractive. We compete enough with them in the big-iron area to know what the price/performance advantage of our architecture is, and that's why he is losing. He will either take a huge margin hit, or he needs to do something different. But he has a lot of cash, and if his board supports him, he can continue to move at the speed he has been moving.

Will Intel ever be able to crack Apple?

The government needs policies that promote investment, not inhibit investment.
We keep trying, but frankly it gets less and less interesting each year. When they were 10 percent of the market it was a more interesting issue. But at 2 percent of the market...our sales can blip 2 percent quarter on quarter, so we can shrink or grow by a couple of Apples. There are lots of interesting aspects in there. Steve (Jobs) is trying to appeal more to the Intel base. You might ask why he doesn't take his OS and try to compete in the other 98 percent of the market. But he doesn't choose to do that.

The OS X kernel runs just fine on Intel. Just a matter of the app stack to stick on top of that. But you'll have to talk to Steve about that. We just try to get design wins with these guys.

Intel does have some marketing approaches in common with Apple, such as the consumer approach with Centrino.
With Centrino, we're trying to make sure the consumer gets the whole brand experience. So we have to make sure it works with what's out there. People are going away from thinking about what particular protocol you have out there to a smart system that will pick out the best connection out there period, and the brand will migrate to that.

Is that something that you are going to provide as a feature on Intel-based systems?
There is a lot of work going on in tuneable radios and giving the user the best possible experience. We started off with 802.11b, but then it's a, g, x or whatever coming. So you want to come into the room and punch a button and say, "Give me the best connection, and the radio is going to tune to that." And hopefully, we will have the billing in place to handle it. That's clearly where the industry is going.

Are you angling for the job of secretary of education? You've talked about education three years in a row here.
It's a complicated problem. There is so much inertia and momentum needed to turn (the educational system) even one degree. The rest of the world is hungry, and the U.S. sees this as a God-given right. We still fortunately have the best university education system, and we need to build off of that and rebuild the K-12 system to complement that. You talked a lot about the U.S. business climate. What needs to be done to make the situation better for companies? Is it stock options, less brain drain?
It's K-12 education, which is this hoary problem. It's more money into the likes of the National Science Foundation for what I call physical science research, IQ research, engineering research, and our research universities. I'd love to see a government that could effectively talk about broadband or infrastructure. So you are saying that the Bush administration doesn't have a handle on broadband and communications convergence?
I don't want to pick on Bush. I don't think the Clinton administration had a good handle on this either. You've got the FCC that is in the middle of this through regulation. And we just had a decision which needs some clarification on new broadband investment, and if you need to unbundle that and make it available to the competition. That needs to be clarified. The government needs policies that promote investment, not inhibit investment. I'm not here advocating that we revisit the entire telecommunications regulation infrastructure. At least on the 21st century infrastructure, which is broadband, there should be policies that promote investment in that. The rest of the world treats our industry as an investment in the future. The United States treats our industry as, you have always been here, you'll always be here, so let?s raise taxes. What's the response from politicians when you deliver this message?
We (in high tech) may have two advantages here. People in our business have a longer thought process than politicians looking to get re-elected. And we tend to travel more than most politicians. I visit about 30 countries a year. So you get to see what is going on around the rest of the world so you can bring that to bear. The message from Intel has been consistent. Fix the education system, R&D, infrastructure, and do no harm (with legislation). Whether they chose to listen and how they put it in their priorities is something we can't control. We give the message.

I thought you might ask me, "Hey, Craig, you are a U.S. citizen. Don't you have a patriotic duty to support the U.S. economy?" Increasingly our business, like other businesses, is international in nature. We will maintain a position as a U.S. flagship company. But we will do business around the globe and use resources around the world. Intel and Microsoft and Hewlett-Packard and Dell are increasingly in this mold. The world is the marketplace. We have a patriotic allegiance to the United States and we will speak as loudly as we can. But if people won't listen, that won't keep us from doing the right thing for our company.