Invented the integrated CPU and pivoted from memory to processors when Japan commoditized DRAM. Partnered with IBM and Microsoft to create the Wintel monopoly. By 2000, controlled 90% of the PC market with legendary manufacturing and 60% margins.
What Changed
CEO Paul Otellini rejected Steve Jobs' iPhone chip deal in 2007, then sold their ARM mobile chip business in 2006 for $600M. Leadership after Andy Grove prioritized quarterly earnings over long-term bets. Spent $70B on stock buybacks instead of R&D. Manufacturing fell years behind TSMC. Missed mobile entirely, then missed AI while Nvidia soared.
Where it Landed
Kicked off the S&P 500 by Nvidia in 2024. Revenue down 30% since 2021. Lost $17B in Q3 2024. Laid off 38,500 people. U.S. government now owns 10% after converting Chips Act funding to equity. Stock still a fraction of 2000 peak despite recent bounce.
The Principles
1.
Incentives shape destiny. Hired-gun CEOs optimizing for quarterly results will sacrifice the future every time. Owner-operators like Grove think in decades.
2.
The innovator's dilemma is real. Intel refused to cannibalize 60% margin PC chips for 20% margin mobile chips. Someone else did it for them.
3.
Manufacturing leadership compounds or collapses. Once Intel fell behind TSMC in fab technology, catching up required tens of billions and years they didn't have.
Builder's Takeaway
3 ways dominant tech companies lose their lead:
•
Watch for the low-margin adjacency that becomes the next platform
•
Buybacks during a technology shift are a distress signal, not strength
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CEO churn every few years means the strategy is broken
