Whoops! Intel’s Otellini passed on Apple’s iPhone

“For 40 of those years, a timespan that saw computing go from curiosity to ubiquity, Paul Otellini has been at Intel. He’s been CEO of the company for the last eight years, but close to the levers of power since he became then-CEO Andy Grove’s de facto chief of staff in 1989.,” Alexis C. Madrigal reports for The Atlantic. “Today is Otellini’s last day at Intel. As soon as he steps down at a company shareholder meeting, Brian Krzanich, who has been with the company since 1982, will move up from COO to become Intel’s sixth CEO.”

“In the last full year before he ascended to chief executive, Intel generated $34 billion in sales. By 2012, that number had grown to $53 billion,” Madrigal reports. “But, oh, what could have been! Even Otellini betrayed a profound sense of disappointment over a decision he made about a then-unreleased product that became the iPhone. Shortly after winning Apple’s Mac business, he decided against doing what it took to be the chip in Apple’s paradigm-shifting product.”

Madrigal reports, “‘We ended up not winning it or passing on it, depending on how you want to view it. And the world would have been a lot different if we’d done it,’ Otellini told me in a two-hour conversation during his last month at Intel. ‘The thing you have to remember is that this was before the iPhone was introduced and no one knew what the iPhone would do… At the end of the day, there was a chip that they were interested in that they wanted to pay a certain price for and not a nickel more and that price was below our forecasted cost. I couldn’t see it. It wasn’t one of these things you can make up on volume. And in hindsight, the forecasted cost was wrong and the volume was 100x what anyone thought.’ It was the only moment I heard regret slip into Otellini’s voice during the several hours of conversations I had with him. ‘The lesson I took away from that was, while we like to speak with data around here, so many times in my career I’ve ended up making decisions with my gut, and I should have followed my gut,’ he said. ‘My gut told me to say yes.'”

Read more in the full article here.

MacDailyNews Take: Ouch!

That decision has to be close to the top of the list of Biggest Business Mistakes in History.

19 Comments

  1. The point is, Steve was right again. Even when talking to the great Intel about design, cost, and volume of a microprocessor chip. Steve was right. A true genius.

    1. He did admit to it…roughly seven years after it happened and in his last month with the company. That dampens the level of respect a bit. But he did admit it, which is more than most people in power ever do.

  2. There was no way in hell that Intel could have designed anything even remotely comparable to ARM for SoC for the price and performance that Apple was looking for.

    It’s just nostalgic rumination from a retiring CEO. ARM kicks Intel’s ass all the way to Timbuktu and back as far performance vs. power consumption is concerned.

    1. Don’t underestimate Intel’s design and fabrication skills. They are and were entirely capable of delivering a CPU suitable for the iPhone, and if they had done so, Samsung would have had a lot more catching up to do.

      -jcr

      1. Well they still haven’t done so and certainly around this time Apple rejected the Atom chip which was noted when an Intel lacky in Germany stupidly claimed Apple had made a mistake in not selecting it letting the cat out of the bag. So either his memory is. Little warped or Intel refused to make something on whatever terms that Apple would have been willing to use.

  3. Well, he had to make a business decision based on data. You can fault him for that. That was his job. And he and Intel haven’t done too bad. Hindsight is always 20/20. Would Steve Jobs have admitted to such a mistake?

    1. Agreed. While he says he should have listened to his gut, the fact is many, many times when you go against the weight of information you wind up in a very bad spot. The sad thing is his information was wrong, and had it been correct, maybe Intel would be in a much better spot today as well as Apple.

      1. Generally gut is based on information and experience its just that it resides in less predictable areas of the brains memory or the information itself is less structured by nature. However when exploited by the likes of Steve Jobs such a quality with the knack of knowing when to exploit it can lead to life/societal changing innovations that would seldom happen if a purely logical linear prediction from data is followed.

  4. Apple is was one of the founders of the ARM (Apple, Acorn and VLSI). They know that technolgy very well. OS X can use what ever processor Apple will. Intel knows this. Apple is Intel’s biggest customer. Apple has all the licenses from ARM.

  5. Apple is not Intels biggest customer, That would be HP,Dell, Lenovo and Altera, followed by Apple. Intel probably made a mistake on refusing the iPhone contract. But intel is king of desktop and laptop chips, and high margin server chips. They’re also huge in the embedded systems market. They’ll be fine. They’re also the kings of raw performance.

  6. Intel is a corrupt company with corrupt tactics to stay dominant so I’m very happy they are not contaminating my iPhone. Sadly I have to put up with them when buying a Mac.

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