When Managers take over from Founders

I will have more in my blog. Stock of Intel price when I left in Jul ’05 was in the late twenties with a fantastic year ahead and sold out capacity. In March ’06 we (still have some shares) struggle in the late teens, Why ? A time when people who mastered the Intel system have started running the company, not the ones who know the market. The article from Forbes below sums it well.

Only the Paranoid Resurge

Big mistakes and a small but scrappy rival have humbled Intel. But the fight isn’t all gone from the chip giant.

Andy Grove hosted a strategy meeting at Intel headquarters in December. Intel’s famously demanding former chief quietly listened to executives politely pondering how Intel’s microprocessors will be shaped by trends like Web computing. When the executives filed out, Grove stayed behind for a one-on-one meeting with Patrick Gelsinger, who runs its largest division: desktop and server chips. He’s also a Grove protégé.

Grove tore into him. He told Gelsinger that he didn’t appreciate sitting through head-nodding meetings that lacked the drama of the old Intel. Where was the shouting? Who was challenging ideas and questioning data? Grove told Gelsinger he better shape up. “He beat the tar out of me for not being confrontational,” says Gelsinger.

A creeping mellowness may be to blame for what has become one of the messier periods in Intel’s 38-year-history. Last month Intel warned that its first-quarter revenue would be $500 million lower than expected. A month before, Intel revealed that inventories had risen six percentage points faster than sales and that it had lost eight points of market share in high-priced server chips to its archrival Advanced Micro Devices (nyse: AMD – news – people ). Even Google (nasdaq: GOOG – news – people ), which has Intel Chief Executive Paul Otellini on its board, has been buying lots of servers with AMD chips.

Intel now trades at 14 times trailing earnings, its lowest multiple in a decade. AMD has a multiple of 100. Intel polled its employees last year on what kind of bonus package they wanted. It was a vote of no confidence: Lose the stock options, bring on stock grants and cash.

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