“If we got kicked out and the board brought in a new CEO, what do you think he would do?”
Andy Grove asked that in the middle of 1985, sitting in his office at Intel. He was the company’s president. With him was Gordon Moore, one of Intel’s founders and its chairman and chief executive. Grove looked out the window at the Ferris wheel of the Great America amusement park, turning in the distance. “Our mood was downbeat,” he wrote later.
What they were stuck on was memory chips, Intel’s first business. Japanese memory makers had shown up in the early 1980s, and by the middle of the decade their chips were cheaper than Intel could match. Intel had tried to fight back with niche products, special designs and more advanced manufacturing, anything that might earn a premium. None of it could beat what Grove called the Japanese “downward pricing spiral.” By his own account, this aimless wandering had gone on for almost a year.
Memory chips were also how Intel saw itself. “Our priorities were formed by our identity; after all, memories were us,” Grove wrote.
Moore answered the question without hesitation. “He would get us out of memories.”
Grove stared at him, numb.
Then he said: “Why shouldn’t you and I walk out the door, come back and do it ourselves?”
Part of the company was already ahead of them. Intel’s production planners divided up factory capacity month by month, and for a while they had been moving silicon wafers away from memories, which looked wasteful, toward products with better margins, such as microprocessors. “These people didn’t have the authority to get us out of memories,” Grove wrote, but they could adjust production “by lots of little steps.” Over many months, those steps made it easier to pull the plug.
With Moore’s encouragement, Grove wrote, they “started on a very difficult journey.” Intel turned to microprocessors. Its chips, including the 386 and the Pentium, helped start the PC era. Grove became chief executive in 1987, and by Intel’s count, annual revenue under his leadership grew from $1.9 billion to more than $26 billion.
After Grove’s death in 2016, NPR played an old recording of the two men telling the story. Grove remembered the question as “What would the new guy do?”
“You’re out of the memory business,” Moore said.
Grove finished the thought over laughter: “He would get rid of us and get out of the memory business.”