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Outgoing Intel CEO regrets not getting Intel CPU in iPhone


In a culture where high-profile employees at tech firms often jump ship for new, exciting and different opportunities, Paul Otellini is something of an exception. Yesterday, Otellini officially stepped down from his role as Intel CEO, a company he exclusively and faithfully worked at for nearly 40 years.

With Otellini stepping down to make room for newly minted CEO Brian Krzahnich, The Atlantic yesterday published an extremely interesting and in-depth feature on Otellini's history at Intel.

In a particularly candid moment, Otellini during an interview expresses regret for not having the foresight to get Intel's chips into the original iPhone. In an industry filled with such stories, Otellini's "what could have been?!" tale is especially interesting.

"We ended up not winning it or passing on it, depending on how you want to view it. And the world would have been a lot different if we'd done it," Otellini told me in a two-hour conversation during his last month at Intel. "The thing you have to remember is that this was before the iPhone was introduced and no one knew what the iPhone would do... At the end of the day, there was a chip that they were interested in that they wanted to pay a certain price for and not a nickel more and that price was below our forecasted cost. I couldn't see it. It wasn't one of these things you can make up on volume. And in hindsight, the forecasted cost was wrong and the volume was 100x what anyone thought."

The hard lesson learned, Otellini explained, was that he should have followed his gut instinct and not relied so strictly on cold hard data.

As for Apple's volume being 100 times what anyone thought, that's an interesting point to consider. It's easy to take the iPhone's success for granted and not really appreciate that Apple's foray into the smartphone market proved to be far more successful than anyone could have initially imagined.

Remember that when Steve Jobs first unveiled the iPhone at Macworld in 2007, he said that Apple's goal was to simply grab a 1 percent share of the then 1 billion-strong mobile phone market. In other words, Jobs said that Apple was hoping to sell 10 million iPhones in the 2008 calendar year.

About five and a half years later, Apple managed to sell 47.8 million iPhones in a single quarter. Indeed, Apple at this point has cumulatively sold well over 300 million iPhones worldwide, an impressive figure that becomes all the more impressive when one considers the net number of iOS devices sold overall.

All that said, let's keep in mind that even if Otellini did all he could to secure a deal with Apple with respect to the iPhone, Apple may have still chosen to go with ARM-based chips which, while less powerful, remain much more energy efficient.

Moreover, Steve Jobs in his biography briefly explained why Apple didn't tap Intel to manufacture chips for the iPad and the iPhone.

Every quarter we schedule a meeting with me and our top three guys and Paul Otellini. At the beginning, we were doing wonderful things together. They wanted this big joint project to do chips for future iPhones. There were two reason we didn't go with them. One was that they are just really slow. They're like a steamship, not very flexible. We're used to going pretty fast. Second is that we just didn't want to teach them everything , which they could go and sell to our competitors.

Otellini, who was interviewed for the Jobs biography, had a different take on things. He told Jobs biographer Walter Isaacson that the real reason the two companies didn't sign on the dotted line was because they couldn't agree on a price and who would control the design of the chips.

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