Comment by roughly
8 months ago
Without arguing the merits of the Altera investment or divestment, a common pattern for Intel seems to be a wild see-sawing between an aggressive and a defensive market posture - it’s a regular occurrence for Intel to announce a bold new venture to try to claim some new territory, and just as regular that they announce they’re halting that venture in the name of “consolidating” and “focusing on their core.” The consequence is that they never give new ventures time to actually succeed, so they just bleed money creating things they murder in the cradle, and nobody born before last Tuesday is investing in bothering to learn the new Intel thing because its expected lifespan is shorter than the average Google product.
Intel either needs to focus or they need to be bold (and I’d actually prefer they be bold - they’ve started down some cool paths over time), but what they really need is to make up their goddamn minds and stop panicking every other quarter that their “ten-year bets” from last quarter haven’t paid off yet.
Speaking from personal experience, many director-level and above positions at Intel, especially in growth related areas are filled through nepotism and professional connections. I've never seen a headline about Intel’s decline and thought, 'Wow, how could that happen?'
I had a business partner that I agreed on a lot of things with but not about Intel. My assumption was that any small software package from Intel, such as a graph processing toolkit, was trash. He thought they could do no wrong.
Intel really is good at certain kinds of software like compilers or MKL but my belief is that organizations like that have a belief in their "number oneness" that gets in their way of doing anything that it outside what they're good at. Maybe it is the people, processes, organization, values, etc. that gets in the way. Or maybe not having the flexibility to know that what is good at task A is not good at task B.
I saw always intel as a HW company making terribly bad SW. Anywhere I saw intel SW I would run away. Lately I used a big open source library from them, which is standard in the embedded space. Work great, but if you look the code you will be puking for a week.
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This is oddly specific. Can you share the exact Intel software toolkit?
Why does this not affect NVidia, Amazon, Apple, or TSMC?
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See the funny thing is, even with all of this stuff about Intel that I hear about (and agree with as reported), I also just committed a cardinal sin just recently.
I'm old, i.e. "never buy ATI" is something that I've stuck to since the very early Nvidia days. I.e. switched from Matrox and Voodoo to Nvidia while commiserating and witnessing friend's and colleagues ATI woes for years.
The high end gaming days are long gone, even had a time of laptops where 3D graphics was of no concern whatsoever. I happened to have Intel chips and integrated graphics. Could even start up some gaming I missed out on during the years or replay old favourites just fine as even a business laptop Intel integrated graphics chip was fine for it.
And then I bought an AMD based laptop with integrated Radeon graphics because of all that negative stuff you hear about Intel and AMD itself is fine, sometimes even better, so I thought it was fair to give it a try.
Oh my was that a mistake. AMD Radeon graphics is still the old ATI in full blown problem glory. I guess it's going to be another 25 years until I might make that mistake again.
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That’s not specific to Intel though. That’s how Directors and above are recruited in any big company.
For example, Uber hired a VP from Amazon. And the first thing he did was to hire most of his immediate reports at Amazon to Director/Senior Director positions at Uber.
At that level of management work gets done mostly through connections, favors and networking.
I tell people that if they get a new boss who is at Director or above, assume that you are re-interviewing for your job for the first 6 months with the new boss.
Major companies like that become infected with large hierarchies of scum sucking middle management that eat revenue with bonuses.
Of course they are obsessed with shrinking labor costs and resisting all downsizing until it reaches comical levels.
Take a company like health insurance that can't show a large dividend because it would be a public relations disaster. Filled to the gills with vice presidents to suck up extra earnings. Or medical devices.
Software is also very difficult for these hierarchies of overpaid management, because you need to pay labor well to get good software, and the only raison d'etre of these guys is wage suppression.
Leadership is hard for these managers because the primary thing rewarded is middle management machiavellianism, turf wars, and domain building, and any visionary leadership or inspiration is quashed.
It almost fascinates me that large company organizations basically are like Soviet style communism, Even though there are opportunities for internal competition. Like data centers and hosting and it groups. They always need to be centralized for" efficiency".
Meanwhile, they are like 20 data centers and if you had each of them compete for the company's internal business, they'd all run more efficiently.
probably because continuous competition is inefficient within an organization and can cause division/animosity between teams?
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> it’s a regular occurrence for Intel to announce a bold new venture to try to claim some new territory, and just as regular that they announce they’re halting that venture in the name of “consolidating” and “focusing on their core.” [...] [Intel's new thing's] expected lifespan is shorter than the average Google product.
You got there in the end. You get the same outcome with the same corporate incentive.
Both Intel and Google prioritize {starting something new} over {growing an existing thing}, in terms of corporate promotions and rewards, and therefore employees and leaders self-optimize to produce the repeated behavior you see.
The way to fix this would be to decrease the rewards for starting a new thing and increase the rewards for evolving and growing an existing line of business.
I cannot speak for Intel, but Google has done very well by "growing an existing thing" in AdWords and YouTube. Both account for the lion's share of profits. They are absolute revenue giants. Many have tried, and failed to chip away at that lead, but Google has managed to adapt over and over again.
It is the only two things that google has regularly maintained, one of which with one of the biggest moats (youtube, the to go video service), and the other connected to the homepage of the internet.
It's really hard to fuck these things up. Which they have been trying hard, given the state of youtube and the search engine.
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It's similar to sales vs dev in software. Sales are always prioritizing new features to attract new users instead of fixing the known issues that are pissing off your current users.
New feature attracts new users and allows for fancy press releases. Nobody cares about press releases about an existing product getting a bug fix are become more stable.
Our society is nothing but "ooh look, shiny!" type of short attention span
But, well, it was a ten-year bet: Altera was acquired in 2015.
If they could not figure how to make it profitable, maybe somebody else should try. (Of course I don't think that the PE company is going to do just that.)
It was a ten-year bet, but they spent the first several years actively sabotaging Altera by trying to move their whole product stack over to non-functional Intel fabs.
...and the majority of their internal development systems they used for all their chip design and layout.
Doesn't purchase by a PE company pretty much guarantee the death of it? At least the selling off of the most profitable parts and pieces? Has there ever been a story of a PE purchase and the company grew under the new owner?
PE’s buy companies to increase the company’s value then sell it. There’s been many successes. Powerschool, Hilton, Dunkin’ Brands, Dollar General, Beats by Dre, Petco, GoDaddy, BJ’s Wholesale Club, Neiman Marcus, Panera Bread, Allegro, Guitar Center, Nielsen, McAfee…
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Silver Lake took Dell private.
M&A churn is a way for management to monetize their power. Efficacy is a distant second concern.
How does management benefit from M&As? Sorry if this is a basic question. Do executives get paid based on the number of acquisitions?
Two ways:
Bonuses by juicing revenue numbers
Bigger next job by doing M&A and having really good-looking resume and interview story.
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If I hold stock in a company, then my company acquires that company, the stock rises, and I liquidate my position in it after 6 months or whatever the cool-down period is, is this considered insider trading?
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This seems to be common for corporate America in general. I used to work at a YC startup. We kiiiiiinda maaaaaaaybe ran out of money (not my department) and happened to get bought by a large investor that also happens to be a US-based hardware manufacturer. Two years and countless reorgs later, they laid everyone off and as far as I know, are no longer in the business of selling the software products they bought. They never figured out how software worked, never had anyone managining the division for more than 6 months, and got bored. I think they thought by moving everyone over to Microsoft Word and Windows laptops (peppered with a half-hearted threat about RTO), they would just magically make billions of dollars the first month. It didn't happen.
I am beginning to think M&A are just some sort of ego thing for bored megacorp execs, rather than serious attempts to add efficiency and value to the marketplace. (Prove me wrong, bored megacorp execs. I'll wait.)
Having been through a few acquisitions myself, I think there is a perverse incentive where buying and destroying any competition (real or imagined) leads to positive enough outcomes that it doesn't matter if the underlying asset is destroyed. Nobody would come out and say that, but when an acquisition is tossed aside there may not be enough repercussions to prevent it from happening again.
Intel bought a drone company that was producing the only drone that was good enough for my real estate inspection company to use. They acquired it and then killed it a year or two after. The inspection industry didn't have a proper drone for years after that until DJI started getting serious about it and produced the M30E.
It was just senseless, Intel doesn't have real or imagined competition from a drone company, it wasn't even close to being in the same market. They just believed the hype about drones being the next big thing and when they found out they were too early they decided they didn't have the patience to wait for drones to become a thing and they killed it. There was no long term vision behind it.
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This is one of the main reasons we added anti monopoly provisions to our laws more than 100 years ago. Market dominance is a recognized factor in allowing this inversion of rewards to occur.
That's the face of it. Labor is a market as well. The impacts of these arrangements on our labor pool is extraordinary. It's a massive displaced cost of allowing these types of mergers to occur born out by the people who stand to gain the least from the merging of business assets.
> I am beginning to think M&A are just some sort of ego thing for bored megacorp execs
It seems like a low risk effort to put a promising inexperienced exec in charge of a recent acquisition.
If they're a screw up and run it into the ground, imagine how much damage they could have done in a megacorp position of power.
Megacorp saved (at the cost of a smaller company)
Is Intel still a mega corporation? That seems to be the real problem for Intel. Becoming prey.
And Intel's acquisitions kill off promising startups. At least Altera is being sort of spun off instead of outright destroyed.
My personal theory is that desktop / laptop / server x86 (usually) is such a giant money printer that a) Intel can invest in anything (Altera, antivirus, Optane...) but b) when they do, they quickly realise that this isn't a giant profit margin machine like x86, so why bother?
They fuck their customers when they do that. A good friend of mine had a product designed around Quark that was about to go into production when Intel pulled the rug out from under him.
I worked for a former Fortune 300 company that had an active internal investment strategy. They wanted the next billion dollar business, guaranteed, in 12 months. And wanted to invest more than 1 million dollars. Sadly they are now bankrupt and owned by PE.
It could just be a stock play.. Need the stock to move up? Buy a company.
Stock down again? Sell the company you bought 2 years ago.
From the top to the bottom the problem with late stage capitalism is misaligned incentives.
Edit: I wrote "the problem" and I should have written "among the many, many problems"
Seems they should read Andy Grove’s books.
> a wild see-sawing between an aggressive and a defensive market posture
tick, tock