Intel Insider

Guy Grimland
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Guy Grimland

"You're asking me if an Israeli could be named chief executive officer of Intel?" says David (Dadi ) Perlmutter, the company's executive vice president. "The truth is that I don't know. After reaching such a senior position within the company, I'm definitely interested in the job. This wasn't a dream of mine, and I didn't even think I would get close. But now, when it's within reach, I want it. Will it happen? I don't know."

Perlmutter is the highest-ranking Israeli executive on the global high-tech ladder, the No. 2 man at a company worth $132 billion. He is essentially the second-most important figure at Intel Corporation - second only to president and CEO Paul Otellini. He currently shares the title of executive vice president with Sean Maloney, with whom he jointly manages the Intel Architecture Group, which develops chip architecture. Maloney, however, has been forced to take time off following a stroke, and Perlmutter is replacing him.

Ultra-Orthodox protesting against Intel’s decision to run a production line on Shabbat in Jerusalem last year.Credit: Tess Scheflan

Perlmutter, 56, is based in Santa Clara, California, and has worked at Intel for 30 years. In an era when career-driven youngsters aged 25-40 switch jobs every few years in order to improve their pay, he is a rare bird.

What, in fact, do you do at Intel?

Perlmutter: "My job is to handle all the company's products, including processors for smart phones and laptops, as well as communication devices and computer integrated systems. Ninety percent of Intel's profits are generated by my group. Intel reported a net profit of $4.3 billion in the 2009 fiscal year. When Maloney worked with me, he dealt with the business side and I focused on the technological side. I'm responsible for 22,000 of the company's 83,000 employees. I'm responsible for workers in development, sales, marketing and other fields."

That is quite a responsibility.

"Let me put it this way: My day is quite busy. I consume a copious amount of information. You want to know everything, but you can't read everything. But I don't manage everybody. There is a management hierarchy."

What does your day look like?

"I wake up at 5 A.M. and get to the office at 5:50. High-tech workers in Tel Aviv start their day around 9 A.M. In Silicon Valley, they wake up with the rooster, and by 7 A.M. people are already in their offices. Most of the day I'm busy with one-on-one or decision-making meetings. I need to be focused because these are complex decisions."

Like many Israelis who have carved a niche for themselves in the global high-tech market, Perlmutter makes frequent trips to Israel and has developed a cultural competence that transcends all borders.

"This is the third time I've relocated to the U.S.," he says. "This dichotomy is not foreign to me. I recognize the cultural gaps and know how to spot them in advance. There are hurdles. Americans are more formal and less intimate, particularly in California. They have a different sense of humor. They accept people from different cultures, but you have to know the limit in terms of how much you can open up to them. You can't go too far."

"On the other hand, you have to remember that there are many immigrants in Silicon Valley," he continues. "In my daughter's school, more than 50 percent of the students are from Indian or Chinese families. It's quite interesting to work with various cultures. You learn what you should be cautious about."

And how do you behave with Israelis there?

"Differently, obviously. There are things you could say that an Israeli would immediately understand ... There's a wide gamut of 'Israeliness,' too - there is the extremely extroverted and crass Israeliness which I don't like, and there is the open Israeliness that puts things on the table. Most of the people with whom I've worked for many years like this openness. There's no doubt that every culture is different. Like, for example, how someone tells you he doesn't agree with you. The Israelis will tell you you're an idiot, while the Americans will say it a bit more politely. The truth is that it is easy for Israelis to assimilate into Intel's culture, because it's an open culture that does not get bogged down with manners. I know quite a few Americans who will bluntly tell you what they think, too."

When Israel faces political attacks and makes headlines, do you ever feel uncomfortable?

"No. I have been working with the same people for many years, some of them 10 to 20 years. I can speak about politics with them. There are things I know I can explain about the Israeli government, and there are things that I can't. I've never been treated rudely because of it. Some of the people with whom I work criticize Israel, and I don't agree with most of their criticism. I try to explain our side. There are more than a few people who listen to me."

Have you changed over the years?

"Men do not usually mature; their toys just become more expensive. But seriously, I'm the same guy I was 30 years ago. I buy practical things, I don't go to expensive restaurants and I don't drive luxury cars. I have a Toyota. But I'm certainly not an ascetic."

Making processors

The first time Perlmutter laid eyes on a computer was at the Technion - Israel Institute of Technology, in Haifa. After completing his military service, he knew he wanted to be an engineer. His parents, who immigrated from Germany in the 1930s, did not finish high school, and wanted their son to get a higher education. Nonetheless, he was not an accomplished student in his teens. "I loved playing soccer and I was a big fan of Hapoel Ramat Gan," he says.

After completing a bachelor's degree in electrical engineering, he joined Intel in 1980: "I studied computers and micro-electronics. Anyone who studied micro-electronics in those days was considered insane. In the 1980s, it wasn't quite clear to me why I needed all this. My hands weren't good enough for me to be a technician. I'm a theoretician who solves problems beforehand, not someone who knows how to weld. I don't have great technical skills, but I like to understand how things work."

Being accepted to work at Intel Israel was quite difficult, Perlmutter notes. "They hired only three engineers out of 70-80 candidates. Even in the 1980s, Intel was considered a prestigious workplace; an American company with an aura."

He started at Intel as a development engineer. In 1984, he led the divisions that created the i387 arithmetic processor. In recognition of his efforts, he was awarded a prize for outstanding contribution to industrial development in 1987. By the end of the 1980s, he was named director of the Intel Architecture Group.

"The Americans did not want us to develop the Pentium processor, and asked us to upgrade the 486 processor. But we didn't just improve the processor, we wanted to do something more significant. That was how the Pentium was born."

In 1992, Perlmutter moved to the U.S. to head up the division responsible for developing Pentium Pro and Pentium II processors. "From Intel's standpoint, these processors were a dramatic change. Until then, they focused on processors that were designed for PCs. These, however, were the first processors that were specifically designated for servers, workstations and information centers."

When he returned to Israel three years later, Perlmutter was put in charge of managing Intel's development center in Haifa. At the time, the center was focused on developing the MMX Pentium processor. It subsequently tried to develop another one, known as the Timna, intended as the successor to the Celeron processor, to give Intel a foothold in the market of cheaper processors. "The processor was not developed due to a variety of reasons," Perlmutter says. "But we used the basis of that processor to develop the Centrino."

There isn't one specific development, he notes, "that built my career. It appears that every project led to the next step. I wasn't given responsibility for the Centrino, Intel's flagship processor, because they liked my eyes. It was because of my work with the i387 processor, the Pentium Pro and the Pentium II.

"There was a sense at Intel that the processors for desktop computers could not develop any further, and that increasing their output was not the right way to go. They thought more people would want laptops. There were quite a few manufacturers who asked Intel to create processors specifically for laptops. We started working on the Centrino in 1998. It became the basis for the next generation of the Intel Core Duo processor."

This line of processors became the foundation not just for all laptops, but also for all Intel brand computers, he explains.

Perlmutter was next tasked with running the department responsible for planning, developing and marketing laptops. He handed over the reins of the development center in Haifa to another Israeli executive, Mooly Eden.

"In 2002 we began work on the Atom processor" - the chip that is now Intel's main processor for netbooks. "In 2006, I moved to the U.S. and was put in charge of all the technological aspects related to Intel's processor development. In 2009, Intel reorganized and placed all of its development and product operations under one roof, which I managed with Sean Maloney."

How well-founded are your decisions?

"Most of the decisions are made while you're on new ground. I, too, have no idea what the future holds. You conduct risk assessments and try not to make decisions off the cuff. You examine a wide range of options, gauge the risks versus the rewards, and you make a decision. I've also had quite a few failures over the years."

What makes you a good executive?

"I can multitask. I think I know how to get to the root of a problem. I understand situations quickly. And I'm ready to take chances. One of the problems is that executives wait for more parameters to lower the risk, but waiting only increases risk. I make a decision and go with it. It doesn't mean I don't check my decisions repeatedly. Sometimes there are changes ... In her book 'The March of Folly,' Barbara Tuchman wrote that a wrong decision is one made even though the decision-makers had all of the facts, or when those facts reasonably could have been obtained. I try not to be foolish, although it happens, too."

What are your red lines?

"Lies infuriate me. I don't fire people for making mistakes, and that includes colossal mistakes."

What do you think makes for a good executive? What does that person need to do?

"Beyond the usual aspects like leadership and initiative, I think a good executive needs to deal fairly with others. A large part of an executive's success is demonstrating intellectual integrity so that people believe what you're saying."

AMD remains your biggest competitor. To what extent do you deal with it or other Intel competitors? To what extent are you focused solely on Intel?

"I deal quite a bit with the competition, and it doesn't just entail responding. You need to think a few steps ahead in order to beat the competition. When a competitor introduces a product, you have no room to maneuver. You need to think well in advance. Part of the thought process is strategic analysis. I try to enter my competitor's shoes and ask myself what I would do if I were him. I try to determine how many factories the competitor is building. I listen to what they are saying at conferences and conventions. I try to anticipate what they are going to do. All of this enters the decision-making process."

You could say that a few errant business decisions on your part could make Intel disappear.

"You could destroy a brand name like Intel quite easily. But even if bad decisions are made, Intel won't disappear in six months. There have been quite a few Fortune 500 companies that went on to become irrelevant. I am certainly concerned. I have a responsibility to my workers as well as to the shareholders, and I need to make sure that Intel does not become irrelevant."

Business and politics

Five months ago, controversy erupted in Jerusalem over Intel's decision to start running its production line on Shabbat. Thousands of ultra-Orthodox demonstrated in front of the factory. Ultimately, the sides reached a compromise whereby Jews would not work there on Saturday.

What is your opinion of the ultra-Orthodox protest? Is there any way to explain this to Intel's global leaders?

"You can explain it, but it is undoubtedly harder to explain to someone who is not Jewish. Maxine Fassberg, the general manager of Intel Israel, handled the affair well. The explanation given was that this was an internal political problem in Israel. Intel's leaders have placed their faith in Intel Israel's executives, who have proven that they know how to defuse local problems.

"The Intel Jerusalem story was not so awful, but these kinds of events have a cumulative effect. There have been other major events in Israel over the years: the two Lebanon wars, the Scud missiles and Katyusha rockets, and the intifadas. Things continue. There is faith in Intel Israel, but, like I said, the effects are cumulative."

Intel is currently holding crucial negotiations with the Industry, Trade and Labor Ministry over a new factory in Kiryat Gat, to manufacture silicon slices using new 22-nanometer technology. Intel Israel is looking into government grants, and has requested $400 million. In exchange, it would commit to investing $2.7 billion in the new plant. Industry sources say the company would hire 400 workers for the factory. Israel's primary competitor for the new plant is Ireland.

Perlmutter says a decision is expected by the end of the year. "There's a good chance that the new plant will indeed be built in Kiryat Gat, but the final decision depends on several variables. Intel must begin manufacturing chips using this technology. In another five years, it won't be using the 45-nanometer technology, which is currently used at its Kiryat Gat plant.

"I won't tell Intel's heads to pick Israel over Ireland. The considerations guiding the company are costs and benefits. Other considerations are managerial infrastructure and past performance, and in this regard Israel gets high marks. Another consideration is the geopolitical situation. In the 1990s it was easier to convince Intel to build a plant in Israel. Having said that, one should note that Intel has been in Israel for 40 years. This is something that cannot be ignored.

"We spoke earlier about intellectual integrity. Intel's management trusts that I will do the right thing for Intel, and for this reason I cannot say the company needs to build its plant in Israel. I am responsible for 22,000 workers at Intel, and just a few thousand of them are in Israel. I need to be able to defend my decisions."

How is the Israeli research and development center viewed compared to Intel's other R&D centers?

"The Israeli R&D center is good, even very good. I think it's one of the best Intel has. At times, it is even the best. There is competition among the R&D centers, and I think it is great. I want competition to spur people to be their best. There are quite a few Intel centers that are trying to learn the Israeli model, particularly centers outside the United States. Intel India is trying to be more like Intel Israel. Nonetheless, it is important to note that the finest minds are not limited to the Holy Land - and I don't want the Israeli R&D center to rest on its laurels."

In recent years, there have been heated discussions here as to how the developing high-tech blocs in the Far East will impact Israeli industry. The fear is that the large quantity and high quality of Indian and Chinese engineers will drive international companies to move their development centers there, and not to Israel. Every year, hundreds of thousands of Chinese earn engineering degrees. The number is lower in India, but still high relative to the rest of the world. In contrast, Israel churns out only 8,000 engineers a year.

Is development migrating to the Far East?

"Israel should be concerned. There are many smart people in India and China. Their governments have placed great importance on developing a technology industry. Nothing lasts forever. The book 'Start-Up Nation' [by Dan Senor and Saul Singer, about Israel's economic development] shows how Israel became a country of start-ups. We need to make sure this continues. It's important to continue investing in higher education, because it is the engine that drives high-tech industry. Israel does not invest enough in education, and I'm not talking only about scientific education. People don't become creative because they solve math problems. You need comprehensive, quality higher education as well as openness and critical thinking, not forcing students to memorize answers.

"Silicon Valley solved the education problem by taking in immigrants from India and China. Intel Israel grew tremendously in the 1990s because of the Russian aliyah, which enabled us to launch quite a few ventures. I believe we have a chance against the Chinese engineers. We just need to find the right niche and run with it ahead of everybody else. Beyond nurturing higher education and encouraging immigration, Israel needs to continue investing more effort in stabilizing the political system and maintaining a steady exchange rate."

Anticipating trends

Intel currently holds 80 percent of the global microchip market. Perlmutter's job is to ensure that the company maintains this market share, and to anticipate the technological trends of the near and distant future.

Perlmutter believes that soon, laptop batteries will last much longer. "We're not far from this," he says. "Laptops can go five, six, even 10 hours without being charged. We want computers whose batteries can last the whole day, but people want their computers to perform certain functions, with good graphics and larger screens and, of course, communication functions. All of this uses battery power."

What would you want to see happen?

"I would want computers to take input by means other than typing or a mouse. In the beginning, the computer was operated with a keyboard. Afterward, it was mouse operated. Now it's through touch screen. We want to enable people to use computers in a three-dimensional world where instead of touch screens, users can touch wide open spaces. I would also want computers to comprehend speech and writing to make interaction more natural."

What do you make of the iPhone and the smart phone revolution? How does Intel fit into this?

"The iPhone did something that we at Intel have been talking about for years. The dumb devices are gradually disappearing. The television is a stupid device, a display screen with a cable that beams in content in one direction. Now it's a two-way street, but you still cannot do sophisticated things. Why not access the Web via your TV? Why not log into Facebook or hold a videoconference through your TV? The telephone has become smarter, as have the television and the automobile."

In what fields should Intel invest more in order to increase its market share? How can it ensure more devices are fitted with microchips to make them smarter?

"Intel cannot neglect its traditional market, the computer market, but my personal dream is for an Intel chip to be implanted in every electronic device. I dream that every stop sign will have a chip that tells your car to slow down."

What do you think of the hoopla surrounding the iPad? Wouldn't you want Intel to garner the same admiration that Apple does? Do you not feel a little envious?

"Maybe a tiny pang of envy, but nothing more. I don't think this is something that Intel really lacks. For years Intel has been listed as one of the best places to work in Israel. I'm not sure I'd want Intel to be more like Apple, because it's just not my nature. But clearly there's a correlation between one's personal and corporate image, and the stock price."

What will win out, tablet computers like the iPad or netbooks?

"I believe in variety. We're still only entering the computer's 'Bronze Age.' Computers are still difficult to use. Even my intelligent wife often gets annoyed over computer problems. It's not like you see me on my back fixing a problem underneath my car. On this issue, Apple deserves a lot of credit. It managed to create the sense that people can easily learn to use its products. Its user interface is simple.

"I don't think one type of computer will win out. Intel's goal is to develop a relatively small number of core technologies that will suit various kinds of computers. The iPad and the netbook are different. I, for instance, carry an iPhone and a netbook. When I want to check something, I use the iPhone; When I want to work, I use the netbook. I don't think I'll buy an iPad. It has great uses, but that depends on the needs of the buyer."