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.
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.