Intel Corp - Shift From Memory Chips To Microprocessors

In August of 1981, IBM selected the 8088 chip for its new personal computer line, which helped to launch the PC revolution when it was shipped. The following year, IBM acquired a 12-percent stake in Intel for $250 million. However, these shares were later sold. By the mid-1980s, Intel had become the tenth-largest maker of semiconductors. It was then that Intel's management decided to shift gears, reducing the company's focus on memory chip operations in favor of the more profitable microprocessor market. Part of this restructuring involved the layoff of 6,000 employees. Intel introduced its revolutionary 80486 microprocessor in 1989. By the end of the decade, Intel had moved its way up to third place among the world's leading semiconductor makers.

Intel's aggressive advertising campaign, centered around the "Intel Inside" logo, proved successful as the company's earnings exceeded $1 billion for the first time in 1992. The following year, Intel released its Pentium processor, which could execute more than 100 million instructions per second and was five times more powerful than its latest 486 microprocessor. In 1994, when the Pentium microprocessor was discovered to make calculation errors under certain conditions, Intel discounted the problem as minor. However, increasingly negative public relations prompted the firm to replace the chips with new ones at no additional cost to customers. As a result, the firm took a $475 million pretax charge. Despite the setback, sales that year grew 31 percent to $11.5 billion. By then, roughly 80 percent of the world's PCs ran on Intel's processors. In 1996, the firm unveiled 150-megahertz and 166-megahertz Pentium models, which were significantly faster than the 133-megahertz model. Revenues soared to $25 billion in 1997. Making its most expensive acquisition to date, Intel paid $40 million for competitor Chips and Technologies Inc. in 1998.