ANDY GROVE

The Life and Times

of an American
RICHARD TEDLOW

RICHARD TEDLOW is professor of business administration at Harvard Business School. In addition to

writing numerous articles for the Harvard Business Review, Fortune and many other publications, Dr. Tedlow
is the author of Giants of Enterprise and The Watson Dynasty. Dr. Tedlow is a graduate of Yale and Columbia.
He specializes in teaching business history and executive education programs.
The Web site for this book is at www.richardtedlow.com.

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1.
Andy Grove was born on September 2, 1936 in Budapest,
Hungary. His given name at birth was Andras Istvan Grof. He
was born into a solid middle class Jewish family. Andy’s father
George was a partner in a medium-sized dairy business while his
mother Maria had given up her dreams of becoming a concert
pianist in order to have a family.
On September 1, 1939, Germany invaded Poland and the
hostilities of World War II commenced. Like all of Europe, the
Grof family were swept up in the dramatic events which then
unfolded. In 1942, when Andy Grove was five years old, his
father was conscripted to the Hungarian Army. Since he was
Jewish, George Grof was assigned to a battalion which was
clearing roads, building fortifications and performing other hard
labor on the Russian front. In the spring of 1943 Maria Grof
received an official notice which stated George Grof had
“disappeared” and despite all her best efforts she never could
find out what had happened to her husband.
When Germany officially annexed Hungary on March 19, 1944,
hundreds of thousands of Hungarian Jews were rounded up and
shipped to Auschwitz where they would be murdered in cold
blood. Andy and his mother managed to avoid getting shipped off
to Auschwitz or any other concentration camps through a savvy
combination of luck, friends and street smarts. They would leave
Budapest for the country whenever any sweeps for Jews were
just about to happen and then return later when it was safe. They
also endured the “Battle of Budapest” which would later become
described by historians as “one of the bloodiest city sieges of the
Second World War in Europe”.
Due to the War, Andy Grove’s early schooling was a little bit
spasmodic and disjointed. This was not a problem because he
had always earned good grades. Andy did, however, contract
scarlet fever, a common streptococcal infection of the era which
was treated at that time by having some bone behind his ears
“chiseled away” by doctors. He was hospitalized for six weeks
and then had to stay home for nine months while he was
convalescing. Andy Grove’s hearing would be permanently
affected by this bout of scarlet fever.
In September 1945, George Grof was finally reunited with his
family after enduring years of hardship in a Russian prison camp.
He witnessed absolutely unfathomable acts of sadism and
cruelty while at the prison camps and had suffered from
exposure, starvation and lack of medical attention. Putting all
these hardships behind them, the Grof family wanted to get on
with their lives, but this was not easy in post-war Hungary. In
late-1945, the Soviet Union had one million soldiers in Hungary,
a nation with a population of around ten million people. The
Communists took firm control of the country’s government.
At first, things seemed to be getting better for the Grof family.
George Grof was appointed as a director of a state-owned
company which bred livestock. Then, when his uncle was
arrested in the middle of the night for being a newspaper editor,
George Grof was fired and was then informed he would never get
another job that would pay more than a quarter of his previous
salary. With the death of Stalin in 1953 and the rise to power of
new Russian leaders, the Hungarian government was instructed
to release most of its political prisoners. According to most
estimates, this was about three-quarters of a million prisoners,
including George Grof’s uncle. Against all this background of
political unrest and uncertainty, Andy Grove finished his high
school education and prepared to go to the University of
Budapest.
Andy Grove - Page 1
By the start of Andy Grove’s second year at Belgrade University
the country was in a state of uproar. An ant-Soviet demonstration
which started peacefully ended with Russian troops shooting
people. With the University closed, Andy spoke with his parents
about the possibility of escaping to Austria. The Russians were
going around summarily arresting young people on suspicion of
being involved in the demonstration, so Andy Grove decided it
was now or never to get out of Hungary. In December 1956, Andy
Grove bid farewell to his parents and headed to Austria.
Getting across the border at that time was a very risky endeavor.
First Andy linked up with another three youth who also wanted to
get out of the country. They caught a train to a town about fifteen
miles from the border with Austria and then disappeared into the
woods. They managed to link up with an underground of people
who helped them avoid the Russian patrols and make their way
towards Austria. After a few tense days of hide-and-seek games
played against the very real danger they would be caught, they
managed to stumble across a field into a farm somewhere inside
Austria. And no sooner had they made their way across the
border than they were arrested by Austrian police and taken to
an unheated schoolhouse where they were instructed to stay. As
soon as the police had left, Andy Grove departed the
schoolhouse and made his own way to Vienna.
After sending a telegram to his parents telling them he was safe,
Andy Grove made his way to the offices of an organization called
the International Rescue Committee. At first, they were reluctant
to provide him with passage to the United States of America but
Grove managed to persuade them. He was included in a group of
refugees who were given transatlantic voyage on an old
converted troopship that was on its way to New York to be
decommissioned. He finally arrived in Brooklyn, New York on
January 7, 1957 along with 1,715 other Hungarian refugees.
“The dangers involved in escaping Hungary were about equal
with the dangers of staying. Hungary was a pretty sad place in
1956 and there were strong rumors about people being picked
up, people my age, being picked up on the street and herded
away and I thought it was a good time to make a run for it. When a
friend of mine and I left Budapest, we had no idea what was
going to happen near the border. You know, there was no
Internet in which there was a home page that somebody could
tell us the border conditions of the day!”
– Andy Grove
2.
The Hungarian refugees were taken to Camp Kilmer, a onetime
prisoner-of-war camp in New York. Fortunately, however, Andy
only stayed there a couple of days. He contacted his uncle Lajos
and his wife Lenke who welcomed Andy with open arms. They
took him from Camp Kilmer and let him stay with them in the
Bronx. Within a short period of time, Andy Grove decided it was
time to get moving again on his college education. Since he
couldn’t afford the tuition fees of Brooklyn College or the
Brooklyn Polytechnic Institute, Grove enrolled at the City College
of New York which was government-funded and thus tuition-free.
“My aim was to acquire a profession that would enable me to
become self-sufficient as soon as possible, so I could support
myself and set aside enough money to help my parents get out of
Hungary and join me in America. I was about to forget college
when I learned about the city colleges. Friends told me all I
needed was ability. Americans don’t know how lucky they are.”
– Andy Grove

As with most things in his life, Andy Grove dove into his
education with gusto. A normal full-time course load was sixteen
credits, but he tried to persuade his curriculum advisor to let him
take twenty-one credits despite the fact he didn’t yet speak
English all that well. He majored in chemical engineering and
took courses in physics, chemistry and calculus. He did receive a
few F’s while he adapted to this new educational system but once
he was acclimatized, he earned mostly A’s and B’s on all the
courses he took at the City College of New York.
“In 1998, Andy Grove said that ‘a lot of what is good in America I
learned at City College’. It was for him the quintessential
American experience. In 2005, Grove gave $26 million to
CCNY’s engineering school, the largest donation the school has
ever received. Recalling his first encounter there, he remarked,
‘They accepted me with respect, without condescension. They
gave me a start, and they gave it in a classy way. It’s an institution
that is crucial to the working of America, and America should be
proud of it. I am.”
– Richard Tedlow
While at CCNY, Grove was constantly irritated by the fact
nobody could pronounce his name correctly. Since this was a
problem which was easily solved, Grove’s engineering instincts
came to the fore. He changed his name from Andras Istvan Grof
to Andrew Steven Grove with little fanfare. For the next few
years, Andy Grove’s life settled in a fairly predictable but
productive pattern of attending college during the year and
working as a busboy at New Hampshire resorts to earn money
over the summer vacations. Andy Grove also got married at
around this same time, marrying Eva Kastan, an Austrian
immigrant, on June 8, 1958.
For all that New York had provided him, Andy Grove didn’t really
like the place all that much. He disliked the weather and felt the
city was gloomy and foreboding. Therefore, when his education
at CCNY was drawing to a close, Grove decided he would take
his new wife and head west to California. Despite the pressing
need to earn some money to help his parents, Andy Grove
decided he would attend graduate school at the publicly funded
University of California at Berkeley
Andy and Eva Grove arrived in California early in the summer of
1960. He enrolled in Berkeley’s fluid dynamics post graduate
program. This was the same year the Democratic party chose
Senator John F. Kennedy of Massachusetts as its candidate to
run against the Republican party’s candidate vice president
Richard Nixon. When Kennedy was made president of the
United States the following May 25, he announced that space
exploration would be a major theme of his presidency. It was a
great time to be an engineer. Grove was at Berkeley about four
years before what would be termed the “Free Speech
Movement” was launched leading to student strikes and so forth.
At Berkeley, Andy Grove plunged into his thesis and managed to
come up with something which would ultimately be published in
the chemical engineering field’s top academic journal, the
Journal of Fluid Mechanics. It was clear Grove could establish an
academic career if he was so inclined, but he wanted to get out
and earn some money to help his parents. He also wanted to do
“something useful” rather than stay at universities all his life. One
of his professors suggested Grove should look for work in solid
state physics which was just starting to take off. Grove hit the job
market but initially found most companies thought his
background in chemical engineering was a disadvantage rather
than an advantage. His personality was also quite strong, and
people either loved him or hated him right off the bat.
Andy Grove - Page 2
Andy Grove’s choices eventually narrowed to two companies –
Fairchild or Bell Labs. While Bell Labs was certainly the place to
be in the early 1960s, its offices were back on the East Coast
where he didn’t want to live. Grove eventually decided on
Fairchild because he had met a chap who worked there by the
name of Gordon Moore.
“Gordon Moore asked me about my thesis, all on his own, and
listened, and got it! He’s a really smart guy – very personable, no
airs. Gordon was a big selling factor, helping me to see what I
wanted to be.”
– Andy Grove
3.
Andy Grove started work at Fairchild Semiconductor in 1963. He
made an immediate impact mainly because he knew how to
program a computer in Fortran – something nobody else in the
company could do at that time. He just happened to have the
right skills at the right moment to solve a problem they faced.
“When I arrived at Fairchild on a Monday morning, my
supervisor, who was an electrical engineer, gave me a problem.
It actually wasn’t that complicated, but it did require taking a
physical problem and turning it into differential equations, solving
the differential equations, doing a family of curves, and looking at
a particular parameter. How lucky can you get?”
– Andy Grove
Emboldened by this early success, Grove also set about
challenging some of the conventional wisdom at Fairchild.
Everyone was focused on surface states but Grove suggested
the effects they were seeing were the results of surface charges
rather than surface states. This caused quite a bit of uproar but
eventually Grove’s hypothesis proved to be correct. Grove also
confronted head on and with no subtlety whatsoever the fact the
company’s research labs were poorly managed despite the fact
some very smart people worked there.
Grove worked hard to succeed at Fairchild with a passion very
few others matched. From 1963 to 1968, he published four
articles in academic journals based on his thesis, authored or
coauthored a further twenty-six articles on new developments in
solid state electronics and filed for two patents. He was also busy
raising a family and teaching a graduate course in
semiconductor device physics at Berkeley. And, just to top things
off nicely, Andy Grove finally had managed to get his parents out
of Hungary around this same time. The Hungarian government
were receptive to anyone who would soon be drawing an old-age
pension moving to the West. Andy’s father was fifty-seven and
his mother fifty-five in 1962 so the government gave permission
for them to immigrate. They eventually made their way to Silicon
Valley where they lived for the rest of their lives. Andy Grove
believed in being busy every waking moment.
The longer he worked at Fairchild, the more frustrated Andy
Grove became by the company’s dysfunctional nature. Fairchild
had become enormously successful as the market for integrated
circuits grew but there was considerable internal problems at the
company. People were continually leaving Fairchild to form their
own companies. Charlie Spork, Fairchild’s manufacturing
manager, left to establish National Semiconductor and invited
Grove to come with him. Andy considered this offer very
seriously but in the end stayed with Fairchild because he liked
Gordon Moore. Then, in May or June 1968, Gordon Moore
confided to Andy Grove that he had decided to leave Fairchild.

“There was a conference on solid state devices. Grove arrived a
day prior to Moore, who was stuck in meetings at Fairchild. When
Moore did arrive, Andy played his accustomed role, busily
updating him about what had gone on at the conference. But
Grove could see Moore was distracted. Grove probed, and
Moore said to him, ‘I’ve decided to leave Fairchild’. ‘What are you
going to do?’ a suddenly very excited Grove asked. ‘I’m going to
start a new semiconductor company,’ said Moore. Without
hesitating one second, Grove blurted out, ‘I’m going with you’.
Grove was never actually asked to join Intel. He invited himself.
How did Moore react? ‘Gordon didn’t say no. I don’t remember
what he said. I mean, he didn’t exactly hug me. But then he hasn’t
exactly hugged me or anyone else in my presence, then or any
other time. So we started feverishly talking about what was to be
Intel’.”
– Richard Tedlow
Despite the fact Gordon Moore was happy for Andy Grove to
come to work for Intel, he wasn’t offered any stock in the new
company. The only three founding shareholders were Gordon
Moore, Robert Noyce and venture capitalist Arthur Rock. Noyce
and Moore both purchased 245,000 shares at $1 each while
Rock bought 10,000 shares at that same price. Rock then sold
another block of 250,000 shares at $10 each, giving the
company about $3 million in start-up capital. Intel was
incorporated on July 16, 1968.
For Bob Noyce and Gordon Moore, participating in a start-up
was old hat since they had already been in two others but this
was a completely new experience for Andy Grove.
“I was scared to death. I left a very secure job where I knew what I
was doing and started running R&D for a brand new venture in
untried territory. It was terrifying. I literally had nightmares. I was
supposed to be director of engineering, but there were so few of
us that they made me director of operations. My first assignment
was to get a post office box so we could get literature describing
the equipment we couldn’t afford to buy.”
– Andy Grove
Gordon Moore had long felt building semiconductor memory was
a product a new company could be built around so it was to this
activity the small Intel team first turned its attention. There were
two competing processes by which this memory could be built in
the late 1960s – the traditional “bipolar” method and a newer
process called “metal oxide semiconductor (MOS)”. Since it
wasn’t yet clear which was best, the company started out using
both technologies. Bearing in mind the fact there were no
personal computers in 1968 when Intel started and the prevailing
magnetic core memory technology for mainframes was well
understood and firmly entrenched, Intel knew it would have to
come up with something which was an order of magnitude better
than anything already on the market if it were to succeed.
Furthermore, the company intended to also avoid the trap of
commoditization by being a moving target. It wanted to invent
new products, price them at a premium, skim the cream of being
the first-mover and then move on to something better before
competitors could drive the prices down on its products. This was
a very ambitious target.
In September 1969, Intel introduced its first memory chip, the
1101. It was a flop and didn’t generate any sales in the
mainframe market. Then in October 1970, Intel came out with its
1103 DRAM – a dynamic random access memory – which was
demonstrably better than anything else on the market at that
time. The memory chip had numerous flaws including the fact
Andy Grove - Page 3
under certain operating conditions it simply did not work. Despite
that, the 1103 delivered a lot of bang for the buck and the chip
sold well. Within two years of its introduction, the 1103 was the
biggest selling semiconductor in the world. This was enough to
put Intel on the map as the memory company and on the strength
of that success Intel went public in 1971, the first year it was
profitable.
In those days, Intel was highly vulnerable. The company’s own
production capacity was fairly rudimentary. Intel was also forced
to send its best engineers up to Canada for months at a time to
help a licensee get geared up for manufacturing. Once that
license had expired, however, Intel moved quickly to change its
production line from using two-inch wafers to three-inch wafers.
That enabled Intel to make its own chips cheaper than its
licensee could match.
“The development of the 1103 and the ramp-up to mass
production have a lot to teach us about Intel’s policy towards
competition. Specifically, it didn’t want any. It wanted to innovate
constantly, make the most of each technological advance, and
then move quickly on to the next one. This meant a high R&D
budget, but the money was well spent if it resulted in high-margin
new products. The goal was to get rid of companies that had
entered its markets, like Microsystems International, but even
more important, to prevent entry by big, aggressive companies
with expertise and organizational capability, like Texas
Instruments.”
– Richard Tedlow
4.
The early years of Intel were an intense learning experience for
Andy Grove. Even though his educational grounding was solidly
on the technical side of the business, he was forced to become a
business manager as well. He focused intensively on solving the
problems that inevitably arose when new products were being
taken from the lab and integrated into high volume production
lines. He also dealt with the challenge of getting people with
healthy egos to put aside their personal interests and do what
was best for the company – no small challenge in and of itself.
Gradually, during 1971 and 1972, Intel’s ability to manufacture
what it designed began to improve. This was just as well because
Intel was also expanding its product line all the time. An erasable
programmable read-only memory (EPROM) chip was developed
as was the microprocessor – a single chip which combined all of
the logic circuitry of a number of other chips. In all of these areas,
Andy Grove was right in the front lines of everything Intel did.
Grove’s contribution to Intel was formally recognized in 1974
when he was appointed to the company’s board of directors. The
fact that only two decades previously he had been an
eighteen-year-old youth living behind the iron curtain in
Budapest was not lost on him. Andy Grove was now vice
president of operations and a member of the board of one of the
world’s leading technology companies. In fact, he was now well
on his way to becoming virtually indispensable in a company
which would itself become absolutely indispensable.
In 1973, Intel recorded $65 million in sales and $9.2 million in
profits. It seemed like the company’s biggest challenge in 1974
was going to be how to deal with all its growth and increasing
complexity, but then suddenly the semiconductor industry went
into a severe slump. By the end of the year, Intel would be forced
to lay off fully 30-percent of its 3,500 employees. The company
still managed to post sales of $135 million for 1974 but by 1975
Intel’s profits were well down on what had been achieved

previously. It was clear the company was operating in a very
tough environment.
“Our naive and evidently erroneous belief was that growing at
top speed was particularly difficult, and that once this growth
stopped life would get a little easier. It didn’t work out that way.
Growth was a lot of work, but it hid a lot of sins. Because of
supply-limited situations one can get away with doing fewer
things and less perfectly. When you are growing, you are
working very hard but while the growth mode may be hard on
one’s physique, it is relatively easy on one’s mind.”
– Andy Grove
To cope with this downturn in business, Intel increased its
investments in R&D as well as in other corporate functions. Even
as it was forced to lay off people from the production side of the
business, new people were being hired to work in new initiatives
like Intel’s recently established microcomputer division. Memory
products continued to be Intel’s bread-and-butter earners but the
company was actively interested in starting other new lines of
business as well.
Of course, not everything Intel tried to do turned to gold. Early in
the company’s history, Intel had purchase Microma, a digital
watch manufacturer. Since digital watches used electronics and
that was Intel’s forte, there was an assumption Intel could run
Microma easily. That turned out to be very wrong. The key
difference was Microma was a consumer products company and
required consumer marketing skills which Intel did not possess.
Eventually, all of the good people from Microma were transferred
elsewhere in Intel and the company was shut down.
By 1978, Intel had been in business for 10 years. Sales that year
were $400.6 million generating $44.3 million in profits. The
company now employed 10,900. Intel was still pretty much a
semiconductor developer and seller. The idea of a home
computer market had not yet entered the company’s
consciousness or product lines but the market forces which
would eventually make their presence felt were gathering in the
background. Andy Grove spent most of his time in this period
focusing on how to get managers that could provide the “oomph”
and enthusiasm Intel needed to keep on growing each year. This
ended up being quite a challenge because most technical people
tend to be introspective and well-meaning rather than
aggressive and enterprising.
“To a large extent, I think we owe our success not to luck but to a
culture of problem orientation, of being critical of ourselves and
thereby urging ourselves and our organization to perform better
and better. This virtue, however, can be carried to such an
extreme that it can bring about our own paralysis through
self-doubt. So let’s try to keep our perspective and permit
ourselves to enjoy the fact that we have never yet in our history
had a problem we didn’t solve.”
– Letter from Andy Grove to the
company’s top management, October 1978
5.
In 1978, Intel ranked 486 on the Fortune 500. The following year,
its ranking rose to 386 as its market capitalization increased from
$638 million at the end of 1978 to $1.3 billion a year later. Andy
Grove was made president and chief operating officer of the
company at the same time Gordon Moore became CEO. Instead
of being under the radar, Intel was now facing a full frontal
assault from the largest semiconductor companies in the world –
Texas Instruments, Motorola, National Semiconductor, Hitachi
Andy Grove - Page 4
and Fujitsu to name just a few. Intel introduced its new 8086
microprocessor to compete against Motorola’s 16-bit 68000
which was widely considered to be technically superior.
To compete against an obviously superior microprocessor, Intel
sales staff stressed the company’s customer service and
support. One of Intel’s field engineers had an “I’ll try anything”
mindset and he decided to pitch the Intel 8086 to IBM, the world’s
largest and most sophisticated information processing
organization. He just happened to call when IBM was in the
process of designing what would become the IBM personal
computer. IBM agreed to use the 8086 chip in their computer
which was unusual because they usually manufactured their
own components in-house. The Intel salesman assumed this
would result in the sale of ten thousand units a year but ultimately
the IBM decision grew to millions of units annually for Intel.
Interestingly, Intel itself had looked at the concept of a personal
computer and decided there was no market for it.
“In the mid-1970s someone came to me with an idea for what
was basically the PC. The idea was that we could outfit an 8080
processor with a keyboard and a monitor and sell it in the home
market. I asked, ‘What’s it good for?’ and the only answer was
that a housewife could keep her recipes on it. I personally didn’t
see anything useful in it, so we never gave it another thought.”
– Gordon Moore
The deal to supply microprocessors for the IBM personal
computer was also good for Intel in another way. IBM agreed to
invest $400 million to acquire 20-percent of Intel’s stock in order
to ensure that Intel survived and would be able to supply IBM with
microprocessors, memory parts and MOS technology. About
two or three years later, IBM then sold its Intel shareholding for
$625 million once it was clear the company could stand on its
own two feet against the big corporations like Texas Instruments,
Motorola and the Japanese companies.
IBM launched its PC in 1981 and it was an immediate hit
generating a dramatic explosion in demand for Intel
microprocessors. By 1984, IBM’s PC sales were estimated at $5
billion with a new PC being manufactured every forty-five
seconds. Sales at Intel rose to $1.6 billion, placing the company
at 226 on the Fortune 500. After-tax profits for Intel in 1984 were
$198.2 million and then all of a sudden demand softened. In
1985, Intel recorded sales of $1.4 billion and its net income
essentially disappeared, plummeting to just $1.5 million. The
company was suddenly being attacked from all sides and from all
directions. Against this background of severe market gyrations,
Intel launched its new 32-bit 80386 microprocessor. In spite of
this, Intel’s sales in 1986 slid to $1.3 billion and the company lost
more than $173 million – its first year in the red since Intel went
public. And while all of this was happening, Andy Grove was
actually on a sabbatical from Intel in early-1986. His planned
twelve-month break was just about to be cut short.
“The culprit was the PC boom. Demand exceeded everyone’s
expectations, and Intel built capacity and grew in every way it
could to meet that demand. The bubble burst at the end of 1984,
and Intel was left with ‘an overhead structure appropriate to the
$2 - 3 billion company we wanted to be rather than the $1.0 - 1.5
billion company we are becoming’. The Management Report in
the 1986 Annual Report contained a postscript from Intel’s
chairman, Gordon Moore. He announced that although he would
remain chairman, Andy Grove would become chief executive
officer in April 1987. ‘Andy has been at Intel since the beginning,
and as president and chief operating officer, he has been one of

the principal architects of this company’s growth, direction and
character. He is an extraordinarily talented manager’. ”
– Richard Tedlow
6.
“We’re in the business of revolutionizing society. This is a
profit-making organization. That’s the way we intended it . . . and
that’s the way it is!”
– Gordon Moore
By the mid-1980s, the Japanese were really starting to make
their presence felt in the semiconductor industry. They were
coming to the market with superb products, factories which could
produce huge volumes and access to very low cost operating
capital. They were also aggressive marketers who were
prepared to quote 10-percent below whatever price Intel or any
other memory producers were charging. Andy Grove was quite
open in describing their threat to Intel’s business as “scary”.
These developments generated lots of internal debate at Intel.
On the one hand, some people wanted to build a gigantic factory
and take on the Japanese head-on. Others felt microprocessors
were growing and were more profitable anyway, so the company
should put more emphasis on them. While all of this was
happening, Andy Grove said: “We had lost our bearings. We
were wandering in the valley of death.”
“At one point in mid-1985, after a year of ‘aimless wandering’,
Grove said to Moore, ‘If we got kicked out and the board brought
in a new CEO, what do you think he would do?’ Moore
immediately replied, ‘He would get us out of memories.’ ‘I stared
at him, numb, then said, ‘Why shouldn’t you and I walk out the
door, come back, and do it ourselves?’”
– Richard Tedlow
As easy as this decision may look in hindsight, making it happen
was intensely gut wrenching for Intel. It actually took about three
years for the company to shut down its memory factories, tell its
memory customers Intel was exiting the business, let people go
and get all its staff up to speed with the changes. Keeping Intel’s
top talent and deploying them in developing microprocessors
rather than memory chips was a particularly tough assignment
for Grove.
When Andy Grove took over as CEO of Intel on April 23, 1987,
the computer industry was still dominated by IBM in mainframes
and Digital Computer in minicomputers. IBM had sales of $54.2
billion that year and a market capitalization of $72 billion. Intel’s
sales, by comparison, were $1.9 billion and its market
capitalization was $4.3 billion. Yet, in spite of the fact Intel’s
entire market capitalization was less than the $5.3 billion in
profits IBM earned in 1987, Intel was just about to figuratively
poke IBM in the eye.
“During the eleven years that he was Intel’s CEO, Grove made
his share of mistakes. He was also lucky, making some guesses
that could have turned out not as well as they did. Above all,
however, Grove was shrewd and astute about the one issue
concerning which he had to be right. Grove understood that ‘The
PC Is It.’ This insight should not be taken for granted.”
– Richard Tedlow
The strategy that Andy Grove then put in place for Intel to move
forward in the new era of being microprocessor-centered was
easy to describe even though difficult to execute.
Andy Grove - Page 5
“We learned that high market share was critical for success, and
that to get market share we had to be willing to invest in
manufacturing capacity. Such investments involve big bets
because they have to be made in advance of actual demand. We
learned that commodity businesses are unattractive, so we
didn’t want to license our intellectual property anymore. Intel
intends to be the vendor of choice. We will extend our
architectural leadership.”
– Andy Grove
When Intel was ready to launch its new 80386 microprocessor,
the company announced that contrary to accepted practice, it
would not be establishing a second source manufacturer for
these chips. This was a very gutsy decision. In effect, Intel was
saying it could serve as its own second source and was not
prepared to license other manufacturers who might eventually
undercut its own pricing. This was a real moment of truth for Intel
because if IBM had insisted that the company establish a second
source supplier, things could have gone very differently for Intel.
As it was, however, IBM was in no rush to purchase the 386 chip.
It was still pretty much focused on mainframes and viewed the
PC as a minor revenue stream. That changed, however, when
Compaq decided it would make a portable PC that could run IBM
software. Compaq brought the 386 chip from Intel and in
September 1986 introduced its Deskpro 386, stealing a march
on IBM. Nobody was really aware of it at the time but this marked
the birth of the IBM compatible market. Compaq reached more
than $1.2 billion in sales in 1987 on the strength of Intel’s
microprocessor, faster than any other company in history.
All of a sudden, IBM stopped dictating the pace of change in the
PC market, and Intel assumed that mantle. Grove moved quickly
and organized Intel into six operating groups, each of which
reported directly to him:
1. Microcomputer Components Group
2. Systems Group
3. Application Specific Integrated Circuit Components Group
4. Components Technology and Manufacturing Group
5. Sales and Marketing Group
6. Administration Group
Running the company was becoming increasingly complex, in
just the same way as Intel’s products were becoming much more
sophisticated. For example, the 80386 microprocessor
contained 175,000 interconnected transistors. Within the space
of twenty years of development, the number of transistors on a
microprocessor had increased to 1.75 billion in twenty layers on
a chip roughly the size of a thumbnail. As can be imagined,
managing the development of such intricate and detailed
development work is not a trivial exercise. Andy Grove had to
manage people who had the technical skills required to pull off
these challenges and turn them into a team.
“There is such a thing as luck and then you grab it and exploit it.”
– Andy Grove
Intel’s strategy with the 386 chip was to lower prices gradually so
it would both sell more chips and discourage others from
entering its markets. The company also developed a variety of
microprocessors for specific markets which used stripped down
and therefore cheaper versions of the 386 chip. Intel also sold
circuit boards and complete PCs. As the PC market moved from
being vertically structured (where one company did everything)
to horizontally structured (where different companies competed
for different parts of the PC market), Intel prospered. A good
indicator of this was the fact the earliest IBM personal computer

had contained about $20 worth of Intel chips. The Compaq
Deskpro had $800 worth of Intel products inside it.
On the strength of that strategy, Intel’s sales increased to $2.8
billion in 1988 and $3.1 billion in 1989. By the time Intel launched
its new 80486 microprocessor in April 1989, it was clear the
company was moving ahead in leaps and bounds. Most analysts
estimated the development costs for the 486 chip topped $200
million so it was clear any competitors would need to make some
pretty hefty investments to get into the game.
“Decisiveness and focus became the hallmarks of Grove’s
tenure as CEO. Another Andy – Andrew Carnegie – used to say,
‘Put all your eggs in one basket and then watch that basket’.
Grove lived by that rule. Running Intel in the 1980s meant living
on the edge. Exiting DRAMs, sole-sourcing the 386, CISC
versus RISC – the wrong decision, or even more insidiously, the
right decision poorly implemented, could have hobbled Intel. The
1990s were to be the years of Intel’s greatness. But there was
nothing guaranteed about that.”
– Richard Tedlow
7.
While it was true everyone in the computer industry knew of Intel
by 1990, this was not true of the world outside. Intel was still at
that stage a business-to-business marketer staffed by engineers
selling to other engineers. That changed when the company
started marketing its newer processors directly to consumers. By
doing this, Intel managed to get consumers to ask for computers
which had its latest microprocessors onboard rather than waiting
until the manufacturers were interested in making the change
themselves. This was the basis for the highly successful “Intel
Inside” marketing program. From 1990 to 1993, Intel spent
almost half-a-billion dollars on the campaign, in the process
managing to establish Intel as one of the world’s best-known and
therefore most valuable consumer brands.
Andy Grove also made what would be another key decision in the
mid-1990s. Intel’s 286, 386 and its new 486 chips used what was
known in the industry as complex instruction set computing
(CISC). A new type of chip had been developed by some
companies based on a different set of technical architecture
called reduced instruction set computing (RISC). The
proponents of RISC suggested since these chips performed
more efficiently, they would ultimately be able to outperform
CISC chips by a significant factor. Grove had to decide whether
Intel should continue developing its own proprietary CISC chips
or migrate to the technically appealing RISC architecture in just
the same way as Intel had once exited the memory business. For
a couple of years, Intel even went as far as staffing a 250-person
division which developed an Intel RISC chip which was released
as an optional add-on for the 486 chip. In the end, Grove realized
the fact more than $30 billion had been invested in developing
software for Intel’s 286, 386 and 486 chips meant there was a
huge incentive to keep improving the current CISC architecture.
Intel quietly disbanded its own RISC team and used them
elsewhere in the organization. At the same time, Grove
announced the company had future generations of CISC chips
under development and performance would continue to increase
well into the future.
“Looking back at these debates, I shake my head about how I
could have even considered walking away from our traditional
technology that then had, and still has, phenomenal headroom
and momentum. Not all paradigm shifts are paradigm shifts.”
– Andy Grove
Andy Grove - Page 6
In another hotly debated move, Grove announced Intel would not
name its next generation chip the 586. Instead, the company
introduced the “Pentium” name. This upset a lot of the engineers
in the company and others in the industry who were comfortable
with the progress from 286 to 386 to 486 but it was absolutely
necessary in order for Intel to secure trademark protection for its
next-generation and other future microprocessors.
“Read about Intel today, ask Andy Grove today what the secret
of its success has been, and it is not hard to arrive at an answer.
That answer is ‘focus’, both as a noun and as a verb. Intel could
focus. Intel had focus. It was a focused company. The focus,
after the RISC sideshow was put to bed, was on the growth and
management of the x86 product roadmap. So successfully and
so creatively was this strategy executed that a mere quarter
century after its founding, in the midst of the most turbulent of
industries, Intel grew into one of the most profitable companies in
all of business history.”
– Richard Tedlow
By the time of its twenty-fifth birthday in 1993, Intel employed
almost 30,000 people, had sales of $8.78 billion and generated
profits of almost $2.3 billion. The company was now at number
56 on the Fortune 500 list, and the magazine noted “Intel was the
most profitable company of its size in the world”. Andy Grove was
suitably pleased with Intel’s progress but he didn’t for a minute
want the company to start resting on its laurels now.
“The job of a manager is to elicit peak performance from
subordinates”.
– Andy Grove
As a reflection of Intel’s growing power within the computer
industry, Andy Grove came into personal contact with the CEOs
of numerous other companies. He met with Louis Gerstner who
became CEO of IBM and suggested IBM should exit
semiconductor manufacturing and become a services company.
IBM would indeed end up doing that successfully, although it’s
unlikely this decision actually was precipitated by Andy Grove’s
suggestion. IBM would not, however, exit the semiconductor
manufacturing visit as Grove had suggested and this became a
strong element in the turnaround of IBM over the next few years.
Andy Grove also met a few times with Bill Gates, the CEO of
Intel. In one famous incident, Bill Gates came to a dinner party at
Andy Grove’s home in Silicon Valley. During the course of the
conversation, Gates mentioned he felt Intel was using
Microsoft’s intellectual property in a product which he believed
competed with Microsoft. He made the mistake of suggesting
this might be “actionable” in a court of law at which point Andy
Grove reared up from the table and said: “Do you mean to
threaten me with legal action at my own dinner table?” The rest of
the night was spent in a rather uncomfortable atmosphere
created by the two CEOs who were both known for speaking their
minds bluntly and forthrightly. Andy Grove would later describe
the evening in this way: “Personally, we had a little hiccup”.
Eventually, however, Intel and Microsoft met with each other a
couple of times a year. It was in the interests of both companies
to preserve and strengthen what the press came to describe as
the “Wintel franchise”. Admittedly, both companies were
competing with each other to corner the lion’s share of the value
within the PC industry but both also recognized the other as a
complementor. Intel and Microsoft worked together to get people
to buy new and better computers even and then competed to see
whether people would pay more for better processors or for more
software. This competition between them is quite intense.

“The differences between Intel and Microsoft occur because our
priorities are fundamentally different. We sell a new chip with a
new computer; we don’t sell many replacement chips or
upgrades. Bill sees a big installed base to take care of.”
– Andy Grove
At one time, Intel also attempted to develop what was termed
“Native Signal Processing” (NSP) technology which had
embedded software designed to make powerful applications
work better in an effort to get people to upgrade to more powerful
processors. Microsoft viewed this as trespassing into its own
territory. Intel dropped NSP once Microsoft introduced Windows
95 because it was not compatible.
Intel’s success also meant it had its detractors. When the new
Pentium chip was shown to have a technical bug in its floating
point unit (FPU) in October 1994, some of that intense feeling
surfaced. The bug was so obscure it was estimated the average
spreadsheet user would run into a problem once every 27,000
years. By December that year, this minor flaw had transmuted
into a major public relations disaster for Intel. IBM was quick to
pounce on an opportunity to get one over Intel and it announced
it would stop shipping Pentium-based IBM PCs immediately. It
wasn’t until Intel announced a no-questions-asked product
replacement offer that all the controversy subsided.
8.
“I have been rabid about four things in my career at Intel:
motherboards, Intel Inside, chipsets, and video conferencing.
What if I had been equally rabid about networking? Intel could
have been a very different kind of company.”
– Andy Grove
Despite the fact Intel was going well in the mid-1990s, Andy
Grove had his fair share of mistakes. In 1995, he made a
concerted effort to launch Intel’s video conferencing system
called ProShare. At one stage, Intel had 700 people working on
the product but it failed to gain much traction in the marketplace.
The fact the system would require everyone to have ISDN lines
installed in their houses was just too steep a technical hurdle to
overcome. Even when ProShare was redeveloped to work with
ordinary phone lines instead, the concept of video conferencing
never really took off. Ultimately, ProShare would swallow
three-quarters of a billion dollars and soak up five years before
Grove would discontinue this initiative.
On a personal note, Andy Grove was also reminded that he was
only human. He had a bout with prostate cancer and had to
undergo radiation treatment at a local hospital. Whether this will
reoccur later in his life remains to be seen but as of ten years
later, it appears his treatment has been successful and the
cancer seems to be in remission. Grove researched his own
treatments options very thoroughly and faced the facts as they
were rather than how he wished things were as he went through
this episode in his life.
Despite these problems, Intel in 1996 was in fine shape. Sales
that year topped $20.8 billion, up 29-percent on the previous
year. Net income of $5.2 billion was up 45-percent on the
previous year. Market capitalization was $111 billion placing Intel
among the top one hundred companies in the United States. Intel
now employed 48,500 people. If you had purchased 100 Intel
shares at the time of its public listing in 1971, you would now have
shares which were worth more than $2 million. And the
noteworthy point about all these facts was that in 1996, the global
Andy Grove - Page 7
semiconductor industry was in the middle of what was described
as a very painful slump. Intel was still going strong because more
than 70 million new personal computers were sold that year and
between 80- and 90-percent of these machines had Intel
microprocessors inside.
“We believe that Intel is a tough competitor and is positioned to
maintain its dominant market position for the foreseeable future.
We believe that Intel views all competition, both existing and
emerging, as credible and serious. It is the paranoia that is
ingrained in the Intel culture that has motivated the Company to
attack its own product line with new products before its
competitors get a chance.”
– Alex Brown analysts briefing
The ongoing commercial success of Intel and the fact its CEO
was a Hungarian immigrant who arrived in America penniless
and then made good on the American Dream didn’t go unnoticed
by the press. Andy Grove was selected by Time magazine as
“Man of the Year” for 1997. Andy also published an article in
Fortune which detailed his very private battle against prostate
cancer. He had also published a number of business books,
including what would become a bestseller Only the Paranoid
Survive. All in all, Andy Grove’s public profile was polished.
“If you want to maintain your success, you have to dodge the
bullets that come from your competitors. Most importantly, you
have to dodge the most dangerous threat to your business,
which is when your environment changes in such a way that the
whole rules of the game get changed, and all of a sudden you find
that your business is in a different game than it used to be before.
I feel one has to be constantly alert in business to the
unexpected, so ‘only the paranoid survive’ is sort of my motto.”
– Andy Grove
When Intel’s sales for 1997 soared to $25 billion placing the
company at number 38 on the Fortune 500, Andy Grove started
thinking seriously about retiring as CEO. He had already
groomed Craig Barrett as his successor and the official
announcement was made on March 26, 1998. At the time of his
stepping down as CEO, Andy Grove was sixty-one years old.
Grove would continue to serve as chairman of the board of
directors of Intel but responsibility for the day to day running of
the company would now fall to the new CEO.
So what was Andy Grove’s legacy as CEO of Intel? As in most
things in life, there are both positives and negatives:
ü In purely financial terms, Intel under Grove’s leadership could
hardly have done any better. By this metric alone, Grove’s
tenure as CEO was a great success.
ü In strategic terms, Intel was struggling for direction when
Grove became CEO. Grove exited the memory business and
got the company focused on microprocessors which ended
up being exactly the right thing to do. That took courage and
tenacity to pull off.
ü Grove was quick to pick up on the fact the personal computer
would be a big commercial success. That allowed Intel to
position itself advantageously in this market before others
were aware what was going on.
ü Grove wasn’t afraid to make the tough decisions. When Intel
refused to license its 386 to anyone else, that was a real
moment of truth. If Intel had acted conventionally , its future
may have turned out quite differently. By doing this, Andy
Grove showed he had nerve.

ü Grove integrated into the DNA of Intel the fact change would
be a constant. The company has never frozen its designs but
continues to develop more complex chips all the time. Intel
views cutting edge technology as a business necessity rather
than as something which would be nice to have. Intel never
settles for “good enough”.
ü Grove always insisted the facts should be faced squarely and
honestly in every situation. He instilled a sense of discipline
within Intel that it was worth persevering to drill down and find
out what was really going on.
û There is no question Grove could have handled the Pentium
floating point flaw better. This was a classic case where he let
things get out of control rather than staying in the driver’s seat.
It also showed that his Intel Inside campaign had been so
successful people now viewed Intel as a consumer products
company rather than a business supplier. Ironically, the entire
issue generated enormous brand recognition for Intel and
once the problem was addressed this actually helped drive
the acceptance of the Pentium chip in a powerful way.
û Equally, Grove has a sharp tongue. He doesn’t make any
attempts to hide his anger. He is well known for his ability to
turn grown men into mush inside Intel. At a personal level, he
is smart, relentless and sometimes dismissive. These
character traits make him difficult and demanding to work for
and people inside the company realize they have to know their
stuff before approaching him. The people who respond best
to this kind of approach tend to be those who have the self
confidence to give as good as they get. Grove seems to have
an inexhaustible appetite for mental jousts. For those who
make it past this, however, they often find Grove manages to
get the best out of them which is often something they
appreciate. It gave them a mental edge which may be
reflected in why Intel turned in such a great performance.
û Grove was determined in pushing the Pro-Share technology
even when the initial data showed the market was not
interested. This ended up costing Intel a lot of money.
û Grove was never afraid to court argument, controversy,
fearlessness or commitment. Over time, these traits have
become woven into the DNA of Intel. From a business
perspective, this is good although from a human
point-of-view, perhaps they are slightly less desirable. Grove
was delighted to be named one of “America’s Toughest
Bosses” by Fortune magazine in 1984 although by the late
1990s, he was starting to get tired of seeing articles headlined
“Attila the Hungarian”.
û Grove did miss some exceptional commercial opportunities.
Intel briefly considered buying Cisco when it was a $200
million company. If Intel had done that, it could have
generated exceptional returns for its shareholders. Intel has
always generated its own growth internally rather than
through acquisitions. While many people may see this as a
strength, in some regards it is a shortcoming. Cisco, for
example, has a market capitalization of more than $108 billion
by 2005. If Intel had acquired Cisco and merged its operations
in with its own, the results would have been very impressive.
Intel has also been very poor at internal venturing or spinning
off successful subsidiaries. The company has simply focused
on being at the top of the microprocessor industry.
© Copyright 2007 All Rights Reserved Summaries.Com
Andy Grove - Page 8
Regardless of how Andy Grove is viewed, there is no question he
would be a hard act to follow. The fact he would be staying on to
look over the shoulder of the new CEO as chairman of the board
was also noteworthy. This meant Craig Barrett would have his
work cut out for him. It was widely assumed Barrett would get
busy fine-tuning Intel’s operations while Grove would look at
more strategic issues like where the company should be heading
in the future.
Andy Grove formally retired from Intel on May 18, 2005 when
Craig Barrett was appointed as chairman of the board and Paul
Otellini was made CEO of the company. Grove adopted the title
of senior advisor and is no longer a member of the board of
directors of Intel. In his final presentation to the board, Grove
used three slides:
The board of directors should trust the
business judgement rule –
which provides broad protection to
informed business judgements in order
to stimulate risk-taking innovation.
The board of directors should
always play the role of gravity
for the governance pendulum.
Lead as the swing starts, retard as the
pendulum has swung to the extreme.
Conform to Intel values. Strive to:
• Encourage and reward informed risk taking
• Be open and direct
• Constructively confront & solve problems
• Communicate mutual intent & expectations
• Do the right things right.
“For Andy, these rules defined the job of the board. Andy was the
last man associated with Intel’s founding remaining. Now he was
gone. His tenure on the board had come to an end, but to
describe him as retired would be quite mistaken. His attention
turned to both health care and to the activities of the Grove
Foundation and the Kinetics Foundation. Andy and Eva wanted
to give others the chance to enjoy what America has made
possible for them. Not surprisingly, these foundations are
action-oriented.”
– Richard Tedlow
“For all that has been written about strategy, I define it simply as
‘what we do’. Strategy should change when the external
environment (the forces that affect us) and/or the internal
environment (our capabilities and knowledge) change.”
– Andy Grove
“Not everyone loves Grove nor does everybody admire him. No
one, however, denies that he is unique. We all are. But Andy
Grove is uniquer than most. He never quits. He is pugnacious.
He is tenacious. The story of Andy Grove is unfinished because
his life is a work in progress.”
– Richard Tedlow