'We don't use the word 'Wintel.' It is Intel with any OS.'

–Dr

Craig R Barrett, President and CEO, Intel Corp.

Dr Craig Barrett took over from

the legendary Andy Grove as the President and CEO in May 1998, when Intel was facing

turbulent times in its core microprocessor business. Moving away from Grove's shadow, and

creating his own identity, Barrett is clearly broadening the focus of Intel to take into

its fold aspects like networking, processors for high-end systems and driving the

development and deployment of applications on the Intel platform. In short, Barrett is

trying to don the cap of an IT evangelist and establish Intel as the leader of the IT

industry. Not that the industry doesn't need either of them.

As part of his evangelizing

efforts, the 59-year-old Barrett has been coming to India regularly for the past three

years. This time, he came as President and CEO of the company. He met the Prime Minister's

IT Task Force and addressed the Indian IT industry and users. In an extensive interview to

DATAQUEST, Barrett spoke about his vision and Intel's stature in the current spate of

things. Read on...

You have taken over as the CEO of

Intel after a long innings from Andy Grove. What is your vision and in what way is your

outlook different from Grove as far as Intel is concerned?



I don't see any significant differences with Andy. And first of all, Andy is not out. He
is still our very active Chairman. And I have been working very closely with him for the

last ten years. And I think our thoughts are very similar to each other. The biggest

challenge I currently face is one of growth. In the last ten years we grew very rapidly,

with average growth rates of over 30%. It's very difficult to grow at large growth rates

when you are a big company. And fortunately in the last quarter, we have been able to grow

very well after a year and a half, which was 1997 and most of 1998. Getting back on the

growth track, both from the revenue and the earnings standpoint, is the biggest challenge

that the company faces today.

Talking about growth, the major

challenge that Intel faces is in the lower-end segment, the sub-$1,000 PC segment, where

the marketshare of the company has come down from around 90% to 45%. What are the

company's plans to regain this lost marketshare?



Well, you need to look at Intel's plans from a larger perspective. First of all, we intend
to be very aggressive in the sub-$1,000 PC category. If you look at anyone's assessment of

the latest additions to the Celeron processor, the 128k, embedded cache etcetera then you

would find very competitive price/performance. And it will do very well in that space. The

Pentium II family is doing very well, and we have a substantial opportunity for growth in

the higher-end workstations and server marketplace, from both the high performance 32-bit

and 64-bit architectures.

So, if you look at the opportunity for

growth, then I want to be competitive in the mobile space, low-end space, performance

desktop, workstation and server spaces. You have to integrate all that and look at our

growth opportunity. Our competition has chosen to concentrate on one of those segments.

And you can see how effective they are if you look at their profit and loss statement. AMD

has been there for the last ten years. National/Cyrix has been there for the past 15

years. National recently witnessed what was a ten-year low in their stock price.

Are you saying that it may not be

able to make money at its current pricing levels, etc. And is that the reason that Intel

is coming under pressure?



I am only stating the obvious fact that they are not making money.

Recently, after your financial

results were announced, Executive VP Paul Otellini said, "Our segmentation strategy

is working. The high-end growth is offsetting erosion in the lower-end." Does this

imply a tacit acceptance of the fact that Intel's near-monopoly position is under severe

threat and the company may have to vacate this space in the future?

Component manufacturers, OEMs and consumers

agree on one thing-selling PCs in the $500-$1000 price range is a good deal only for the

consumers. It is not a good deal for the OEM PC manufacturers or the component

manufacturers. Therefore, if you are going to have that sort of segmentation occur in the

marketplace, then what you would like to do is isolate it to the extent you can from the

rest of your business. That's what the segmentation strategy is. We have a family to

compete at each segment. The Celeron family of processors competes in the low-end space.

The Pentium II family is in the next level. Then you have Xeon, Merced etcetera. The

recognition is that some places you get paid for a performance premium, and some places

you will not get paid at all, and segmenting your products and brands into different

categories aids in recuperating your investments.

Does this imply that Intel's future

investments will be directed at the upper end efforts, in terms of R&D, marketing

efforts and everything else that goes into creating a product?



Well, we intend to be competitive in each one of those segments. But clearly, you would
tailor your investments to where you get your greatest return from. We are clearly making

a big investment in the 64-bit family of processors. We don't have a product in the market

today. So that is totally investment and no return. The Pentium II-Xeon family is doing

very well in the high end. So, we will continue to invest in all the categories and be

very technically competitive in all those categories. But I think there is more

opportunity to grow in the higher end than in the lower end.

Closer home, specifically in Asia,

the markets are price-sensitive to a larger extent. Would you be following a different

marketing strategy because the pressure on you might be higher, say, than in the US?



You know I keep hearing that the Asia market is more price-sensitive than the rest; the
Latin America market is more price-sensitive than the rest; the European market is more

price-sensitive than the rest; and the US market, where the sub-$1,000 PC had its origin,

is more price-sensitive than the rest. So I don't agree that the premise of your question

is correct. The premise, you know, is the same everywhere.

And I don't think it is necessarily bad

that they have the segment of the business. With the sub-$1,000

category, there are a number of things. One is it gets more people interested in computing

because more people will buy computers. That's where the industry will focus on. Second,

it has shot Larry Ellison in his foot. His network computer, which was

going to change the face of computing, and suddenly you have the sub-$1,000 PC which

competes with the NC. And nobody asks me about the NC anymore. The marketplace has spoken.

NCs are replacing only dumb terminals, and not the PCs.

A recent survey by Ziff-Davis

pointed out that in a PC purchase decision, 'Intel Inside' was the #1 factor till a year

back, but now it has slipped down to #3. Does this imply that a greater emphasis is now on

the brand name of the machine than on the chip inside?



Not particularly. I think you have to look at where and how the survey was taken. If you
look at the corporate area, the 'Intel Inside' brand is very significant. The

competition's focus is on almost exclusively the low-end retail marketplace. That category

(sub-$1,000) quite often is entry level, new participants, and price is a very important

feature there. These factors are more important than the OEM brand, the 'Intel Inside'

brand and whatever. The US retail marketplace is very interesting to play, but it

constitutes less than 10% of the computer marketplace worldwide. And we are interested in

the totality of the computer marketplace.

We spend extraordinarily large sums of

money in terms of our direct advertising and corporate advertising (Intel Inside). We

would be terribly foolish to spend the money if the OEM name was the only thing that drove

a consumer into purchasing the PC...

...And you don't see this trend

changing in the future?



There is very strong end-user recognition and commitment to 'Intel Inside'. And

we don't see that changing in the future from the statistical studies that we do. If it is

changing, then I will have to do one of the two things-either fire my marketing manager or

I do something else .

Processors are encompassing more

and more capabilities like graphics, audio, video etc. What are Intel's specific plans in

this scenario?



We are introducing the Katmai family of processors in Q1 1999 and it has 72 instructions,
basically capabilities like imaging, animation and such other calculations. So that is one

area. Input/output area too is an area which will get increased focus. Then there is

Merced, and the future processors, like McKinley, Willamette and so on and so forth.

Processor speeds are not going out of vogue. More and more speed will continue to be

needed for the next 15-20 years. We will double the processing speeds every 18 months. So

this will continue, and future processors will have added instructions, features for new

data types like speech recognition or increased graphics, animation capability, 64-bit for

long addresses and other things we are going to address. They are quite boring, mundane,

but that's what keeps us going.

But what about some of the

fundamental changes that you will find in a chip. One is obviously speed, but what about

other integration on the chip?



Well, you can put more and more transistors in your processors. More transistors

mean more capabilities. You can put the graphic function, memory control function etc. If

you want to do a lower-cost solution you typically put in more functionality into the

chip. You see some movement in the server space, where performance is driven by access to

the local cache memory. Embedded cache is incorporated into the processor, especially in

the server workstation space, where it is critical. So you see solutions which come out

like one Meg and two Meg cache memory or more in the future incorporated into the

processor itself. The other area which could be important in the future is general area of

security. With the internet, security and privacy are becoming of paramount importance.

Security is more of software architecture, but you could also incorporate security aspects

into hardware architecture. So in each one of those areas you can put in so much

additional functionality into the chip.

A delay in Merced means

consolidation on the Alpha front, especially with Compaq behind it. How do you read the

situation in this light?



You know I get a real kick out of talking about Alpha. Compaq is Intel's biggest IA-64
server customer. And that's where the profits will come for Compaq and not sub-$1,000 PCs.

They buy Digital and what comes with it is the Alpha business worth $4 billion. And the

media is excited about the fact that Eckhard Pfeiffer comes out and says, "We are

going to back Alpha." What could he say? No, we are not gonna back it? I don't care

about the $4-billion business that we have today based on Alpha. He has to say that he's

gonna back it.



There is only a six-month delay in Merced. And there is a whole range of processor
families that we have announced in the Microprocessor Forum. There is Merced, McKinley,

Cascades, Foster and whatever, whatever they are. We are doing parallel designs in the

32-bit family as well as the 64-bit family. Every computer OEM, including Digital before

Compaq acquisition and Compaq after it acquired Digital, has committed to the Merced

family and the IA-64 architecture. There was a postmortem done in the Forum about the

existing RISC architectures in competition with Intel architecture. Basically, there is

one computer company that hasn't committed to the Intel architecture. You know who it

is...

..Sun?



Yeah, Sun. They have said that they will use the Intel architecture and port

their software on it. Put their software on Intel architecture rather than incorporate

Intel architecture into their boxes. We are bullish and confident on the 64-bit family and

the high-performance 32-bit family. The two will coexist for a long period of time. The

32-bit server family gives you high performance today, and competes effectively with

PowerPC, Sparc, Alpha and MIPS. The Pentium II-Xeon family compares very well with them

both from an absolute performance standpoint and the price/performance standpoint.

Going India-specific, if you had to

set up a manufacturing facility, what would be your imperatives which would influence the

decision?



The answer is very simple, and this answer is what I give to every country. I suggest them
to become internationally competitive, and I would be putting a plant anywhere in the

world. Our business is one of international competition. We may have a manufacturing plant

in India but it would have to produce far more than India could ever consume. So people

will have to be competitive from an exports view. So all the elements that go into

determining whether a plant is competitive with any other international location for

exports is exactly what has to be satisfied by India. It includes telecommunications

infrastructure, transport infrastructure, workforce, taxes, government attitude, utility

infrastructure and surrounding industry infrastructure-if Intel puts up a wafer

fabrication facility, there has to be applied materials, chemical industry etc. I think it

is a long way off.

But I think the opportunity is much greater

if Intel acts as a venture capitalist here. As we do in the Western world, we can invest

in small Indian companies with exciting new technology in and around the computer

industry. I think we would qualify as the biggest venture capitalist in the world in this

area. Last year, we made over 100 investments worth $350 million in small equity

investments in small start-up companies. I want to extend that program in India. To me,

that's a much stronger approach to getting involved in the Indian economy and value add to

the country. I could probably put one manufacturing plant in India, but this way I could

make tens of investments in small companies, which would be the foundation of your future

IT business. For me that's much more exciting possibility. And we are putting in

infrastructure to support that initiative.

Considering the manpower-related

skills which India has, do you think hardware design is a feasible area of investment?



Sure. That's entirely possible. We have design teams working in Israel and Malaysia, but
both might be working on the same product. But, right now our major focus is working with

your software industry, rather than hardware design. You know, value-added software

content, digital content creation. Those areas I think are exciting for the future.

You have been visiting India

regularly for the past three years now. What is the objective behind coming to India every

year? What are you looking at?



We have formally been here for ten years. Our objective is to bring the latest technology
to Indian PC manufacturers. I come and talk to our customers. I come and look at the

marketplace and how computers are sold, what's exciting in the marketplace, the

distribution channels-which of them work and which of them don't. I talk to government

leaders, as I did this time , about what takes place in India, what you

have to do to become a major player in the IT industry and what you have to do with the

infrastructure whether it is telecommunications, the internet, software, business startups

and taxation, and get an overall feel about the industry here. I am little bit of a

hands-on person. I like to come and see what it looks like rather than read about it in

the country manager's progress reports. And I just like to visit India.

You have recently invested in a

Linux company, Red Hat Software Inc. How do you perceive the potential of Linux vis-a-vis

Windows NT? Do you see Lintel instead of Wintel in the coming years?



Our strategy is very simple and it has been that we would like Intel architecture to be
the port for any OS. Linux is getting increasing popularity in a couple of categories-ISPs

and an increasing number of corporations are embracing Linux. So we support Linux, just

like we support other Unix variants. We support Windows. We support anybody who wants to

port their OS onto our hardware. Sometimes we make investments and some other times we

don't have to make investments. Linux is a free software. This investment was done to

support them to be viable. And frankly Unix is the one when you get to those big

enterprises, in terms of scalability, reliability. You know Unix still has a lot of

popularity when you talk about enterprise applications. The media talks about Wintel all

the time. We don't use the phrase. It is Intel with any OS.

face="Arial" size="2" color="#000000">SHYAM MALHOTRA



and SIVAKUMAR V,


in New Delhi.