A 'Lesson' For Intel
It's as if the Marlboro Man had fallen off his horse. Such icons of inspired marketing aren't meant to be muddied, as mighty Intel Corp. recently learned. Along with the chisel-chinned cowboy, Intel Inside is one of the most recognized brands in America. So when a flaw showed up in its latest and most advanced computer chip, and Intel tried to gloss it over, there was heck to pay. Wall Street clobbered the company's stock. (Intel shares lost 5 percent over the last two weeks.) Big computer makers were outraged. ""Disaster,'' groused one analyst. Said another, worrying that all computer makers might be tarnished: ""It gives the industry a black eye.''
Why the high dudgeon? After all, the glitch in question, found in the company's prized Pentium chips, is mind-bogglingly rare. It involves only the repeated division of numbers with five or more digits, and, by Intel's reckoning, might occur in only one of every 9 billion calculations. Most people would encounter a problem only once every 27,000 years. Such long odds might normally be shrugged off, but the difference here is that Intel is Intel. Its microprocessors drive nine of 10 of the world's 150 million PCs. To think they might be flawed is unnerving -- all the more so because the company has spent hundreds of millions of ad dollars assuring a new generation of neophyte computer users that Intel Inside means ironclad reliability. This isn't about technology, explains Drew Peck, an analyst at Cowen & Co. ""It's a question of image and credibility -- and a case study in how not to handle your public relations.''
Andrew Grove couldn't agree more. ""We do have a public-relations mess,'' Intel's chief executive admits. The affair ""will go down in Intel's history,'' he adds -- and prompt the company to do things differently. As Grove recounts it, the furor began innocently. Intel discovered the problem this summer but didn't consider it serious enough to go public. ""We couldn't imagine anyone ever running into it,'' says Grove. Intel began shipping the Pentium in May 1993, he adds, and had received no complaint. But then in October a professor at Lynchburg College in Virginia uncovered the bug and posted word on the Internet, the electronic network linking research institutes and advanced computer users. Overnight, it seemed, the computer world went nuts. If Intel did not disclose this flaw, techies speculated, how many others might there be? Buyers of Intel's chips, the nation's top computer makers, were furious. ""I am not pleased,'' says a senior executive at one of the world's biggest companies, calling Intel's silence a ""cover-up.'' Intel, he says, should have come clean, right off the bat.
It's easy to understand Intel's point of view. Hardly anyone will be affected by the bug. For the few who might be, there's an easy solution. Intel has already fixed the problem in its latest Pentiums, coming out within the next few months. That's a big step toward setting things right, but it hasn't defused anger. Intel refuses to consider a general recall, saying that it will replace chips only for users who can show they're affected. As a result, Intel's customers have felt compelled to offer their own guarantees. IBM last week said that it would replace problematic chips. So did Hewlett-Packard, Compaq Computer and Gateway 2000, the nation's biggest seller of Pentium computers. There's no sign the flap will hurt Intel's business; Pentium computers are selling like gangbusters. But the company has learned at least one painful lesson. First, icons must always admit to their problems. Another might be: the customer is always right.
