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Intel Prepares Computer Chips For The Next Century

January 13, 1993

SANTA CLARA, Calif. (AP) _ Intel Corp., expected to announce record revenues and profits Wednesday, is riding a wave of sales success, and Chief Executive Officer Andrew Grove says that the company’s greatest risk is overconfidence.

Intel manufactures microprocessors, the ″brains″ inside personal computers. Sales of its leading-edge Intel 486 chip have boomed as the PC market saw deep price cuts in recent months that spurred hefty year-end sales.

Intel is the leader in the U.S. chip-making business, an industry that last year reclaimed world leadership from the Japanese.

News articles calling Intel a possible successor to International Business Machines Corp. as the new dominant company in the computer industry clearly have Grove worried.

″We cannot be smug, or overconfident,″ he said in a recent interview.

Grove said he is particularly concerned that his worldwide sales force will stop pushing the firm’s products aggressively and may sit back and ″count their stock.″

Analysts say one of the biggest reasons Intel has become so successful is that it has been able to stay ahead of the curve by inventing newer, more powerful products just as PC makers need them.

While competitors such as Advanced Micro Devices Inc. and other chip makers continue to cut into Intel’s once near-total hold on the lower-end 386-chip market, software makers such as Microsoft Corp. are now making Windows and other complex software programs and applications that require the more powerful 486 chip to run them efficiently.

Although Apple Computer Inc. develops its own chips, virtually all IBM or IBM-compatible computers use Intel chips.

″They have successfully rolled their monopoly from the 386 to the 486. That was a very important move,″ said Andrew J. Kessler, an analyst with Morgan Stanley in New York.

Intel will release its fourth-quarter and year-end earnings statement early Wednesday. Last year, it had earnings of $650 million on revenues of $3.9 billion. During the first three quarters of this year alone, it had profits of $638 million on revenues of $3.99 billion.

So behind a huge spurt in PC sales before and during the holidays, analysts and others know the news will be bright.

″I think it’s going to be a very good quarter,″ spokesman Howard High said Tuesday.

Many corporate and home-computer users have shifted from 386-based machines to 486 ones, at prices far below the level of even a year ago. Today, a 486- based PC cost about $1,200 or less at discount warehouses or via direct sales.

And American companies, many of them restructuring to cut fat and reduce labor costs, have found computers are a way to increase productivity, analyst Kessler said.

Intel’s stock, listed on the over-the-counter market, has jumped from a low of $38 per share in September 1991 to over $100 a share this week. It closed Tuesday at $102 a share, off 37 1/2 cents.

A recent court decision in a longstanding lawsuit between Intel and Advanced Micro Devices upheld Intel’s claim to patent rights for the so-called ″microcodes″ in the 486 chip. That means that Intel’s hold on the 486 patent should continue through the first half of this year. By then, its next- generation Pentium chip will be out.

The Pentium, with 3 million transistors on a single slice of silicon wafer, is due to begin shipping to customers in the second quarter. Meanwhile, the company already is working to develop even more powerful processors, code- named P6 and P7. The P6 will have between 5 million and 7 million transistors. The P7 will have about 10 million, Grove said.

In addition to its core chip business, Intel also is pushing ahead with its parallel processing business as the popularity of mainframe computers drops. Parallel processing is the use of many small computers running simultaneously - and much less expensively - than large mainframes.

That and other changes are taking place in the computer industry at such speed that even those long familiar with it are dazzled.

″We are living a life in fast-forward. Everything is speeded up,″ Grove said. ″The industry will reach a plateau when people no longer think of new uses for these things.″

But that’s not likely to happen soon, he added.

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