31 An Anonymous Caller
ARTHUR ROCK WAS PROBABLY standing staring out of the floor-to-ceiling windows, gazing at the evening lights of the December city skyline, when the call came in.
His office suite, on the twelfth floor of a tall tower in San Francisco’s financial district, had a group of comfortable sofas at one end dominated by a collection of bold modern pictures. But Rock, who had suffered a bout of polio as a child, liked to take calls standing up. Next to his desk stood a light-coloured wooden reading lectern, which allowed him to work on his feet – like a clerk in a nineteenth-century government office.
It was hard, though, to imagine anyone further removed from the nineteenth century. Rock was a billionaire venture capitalist, who had made his money by investing in some of the most successful technology companies in history. He saw his job as doing more than simply picking winners and then sitting back to watch them get on with it. When Arthur Rock invested money in a company, he sat on its board of directors and helped to guide its strategy. In times of crisis, when his investments might be at risk, he’d be ready if needed to step in with firm advice on how the company should recover its correct course.
The incoming phone call gave no clue that today might be one of those occasions. As Rock’s secretary put the call through to his speakerphone, he heard the soft-spoken voice of Gordon Moore, chairman of Intel Corporation, opening the proceedings with his customary calm. Ever methodical, Moore would often start Intel’s board meetings by checking that all the participants had received the appropriate papers from Jean Jones, his trusted secretary for nearly thirty years.
Rock didn’t need to be told why the Intel directors were holding today’s board meeting by conference call instead of at the company’s headquarters in Santa Clara, just over an hour’s drive south of the city. Like the other Intel directors, he had read all about the crisis in the New York Times and the Wall Street Journal.
Intel’s heavily advertised flagship product, its new Pentium microprocessor, was flawed. The company had known about the flaw for some months and kept quiet about it, believing that only a tiny fraction of the millions of users of the chip across the world would ever be inconvenienced by the problem. But the flaw had been discovered by a mathematics professor, whose data had been posted on the Internet. Intel’s attempt to play down the issue had angered customers, worried investors, and ultimately provoked a storm of criticism in the media, culminating in a damaging report on CNN.
As the problem escalated, Intel’s response had been doggedly consistent. The company had kept repeating that the flaw was unimportant, and kept insisting that it required no corrective action from most owners of computers equipped with a Pentium chip. Intel had admitted that a small number of specialized users, mostly scientists or mathematicians, might need their Pentiums replaced. But Andy Grove, the company’s combative chief executive officer, insisted that the people best equipped to decide who was in this category were Intel’s own engineers. As a result, customers who wanted to return a flawed Pentium would have to call Intel and convince the company that they really needed a replacement.
Intel’s approach to the issue had the support of the computer industry. The last thing that makers and retailers of PCs wanted was to be put in a position where they had to open up hundreds of thousands or even millions of PCs already in the distribution channel on their way to end-users, and go through the time-consuming and expensive business of replacing their existing processors with new ones. So the industry, which understood from experience that no microprocessor was ever perfect on first launch, stood staunchly behind its leading chip manufacturer. Company after company issued press releases telling customers that the Pentium flaw was nothing to worry about, and Intel’s approach to the problem was just fine.
That wasn’t how the general public saw the issue. Inflamed by critical comments on the Internet, newspaper readers and TV viewers couldn’t understand why a maker of microprocessors should be any different from the rest of manufacturing industry. If you were in any other business and discovered a major problem with one of your products, you offered customers a free exchange, no questions asked. It was as simple as that. You didn’t screw them around by telling them the problem probably wouldn’t affect them and force them to call you and jump through hoops before they could get a replacement. Yet that was what Intel seemed to be doing – and its attitude seemed to be brazenly arrogant, since the problem with its new chip, advertised as the latest and greatest in computer technology, was a simple one: it couldn’t do long division properly.
For a few uneasy weeks the alliance of expert insiders had succeeded in defying the instincts of the less well-informed outsiders. It had looked as though Andy Grove’s boldness and willingness to take criticism and unpopularity would eventually triumph. The chorus of complaints against Intel had begun to die down, and consumers had seemed to be getting the message that the Pentium flaw wasn’t such a big deal after all.
But the situation was precarious. It depended on the giants of the computer business maintaining complete unanimity. If just one major vendor changed sides, then it would no longer be possible for Intel to convince its customers that all the experts agreed there was no problem.
That change had now happened. International Business Machines, the computer giant that had unwittingly helped Intel rise to dominance
