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Intel and Cisco CEOs Talk Change at Brainstorm Tech

One thing I found interesting at this week's Fortune Brainstorm Tech conference was how the technology companies that have been leading their markets for decades see a big need to change going forward.

July 15, 2016
brian krzanich

One thing I found interesting at this week's Fortune Brainstorm Tech conference was how the technology companies that have been leading their markets for decades see a big need to change going forward. I've heard Intel CEO Brian Krzanich and Cisco CEO Chuck Robbins talk several times recently, but at this conference, they talked more about the changes their firms were going through.

Intel
Intel CEO Brian Krzanich talked about how the company sees the PC business continuing to decline at low single-digit rates, but envisions growth coming from data center, memory, and IoT (Internet of Things) products. He said that in a cloud-based world, he foresees getting data from "things," moving that data to the cloud, and storing it "all tied together into one strategy that feeds on itself."

Intel has been talking about this strategy for a while, but some of the examples were new. For instance, he talked about how the forthcoming 3D XPoint memory would let a data center save large amounts of data at a fast speed, and how an autonomous car would generate large amounts of data and would need to retrieve data at high speed.

Pressed by Fortune's Adam Lashinsky on the irony of Intel getting back into memory years after Andy Grove led the company to famously leave the memory business in the 80's, Krzanich said that while Intel is a great manufacturer, it wasn't structured to be a commodity business. He said that as the cloud becomes more important, memory becomes even more important, and the company started working on unique proprietary memories about 10 years ago. "What Andy taught us was adapt or die," Krzanich said. (Left unmentioned in the discussion was that Intel has been working with Micron, its partner for 3D XPoint memory, in making NAND flash memory for more than a decade.)

Krzanich said that he thinks the IoT business can move the needle for Intel, saying it is already a $2 billion business, and that he think it will be billions of dollars larger as we exit the decade. By 2020, he said, he expects 50 billion devices will be connected to the Internet, most creating a lot of data. While the average user creates 1.5 GB of data every day, he said the typical connected car will create 20 GB of data a minute, a drone will create 20 GB of data a minute, and Intel's Replay 3D sports system creates 200 GB of data a minute. In general, he said, machines will generate much more data, and then machine learning will take the data and learn from it.

Intel missed a lot of the move to mobile, with Krzanich explaining how the company bet on WiMax instead of LTE and initially missed the 4G transition, but said that now, through the firm's Infineon Wireless purchase, it has a "world class" modem. But he noted that aiming at the cell phone now is aiming behind the curve, saying the biggest mobile creator of data in five years will be the automobile.

He talked about the changes he has brought to Intel, including bringing in many leaders from outside the company, and trying to change the company culture to improve speed and product dynamics.

Krzanich seemed nostalgic when he talked about how much he loved running Intel's manufacturing, where he came to work in shorts and a t-shirt, calling that "the funnest job I've ever had." Being a CEO is very different, he said, and involves having to dress nicely and go to board meetings. "A lot of the to-do parts of the job I genuinely don't like," he said, but he does love that Intel is the greatest technology company in the world. He noted that Intel is one of the country's great manufacturing companies, and still makes between 50 and 70 percent of its products in the U.S. "I can go build anything I want," he said, saying he gets "huge joy" out of solving problems like moving to 7nm and 5nm production.

Cisco

chuck robbinschuck robbins

Chuck Robbins, who took over as CEO of Cisco Systems from John Chambers about a year ago, talked about how the firm was becoming a larger player in security, analytics, and IoT; and how this was changing the big networking company.

On security, Robbins said that Cisco is "the number one enterprise security player" even though it only has an 8 or 9 percent market share. He talked about the company's recent cloud-based security announcements, such as its acquisition of CloudLock, and said Cisco has "an opportunity and an obligation" to add security to the network, saying security in the future needs to happen "when the data hits the network."

On the IoT side, Robbins talked about connecting billions of devices. As examples, he discussed an elevator company connecting 1 million elevators to the Internet, which would support things like advertising but mostly be beneficial for preventative maintenance and energy management. Similarly, he talked about working with automotive robotics. He said the Jasper IoT platform connected 31 million devices, a number growing at 1 million a month, with 5,000 enterprise customers supported, growing at 120 a month.

Robbins said this was indicative of the changes in marketing overall. In the 90s, he said, value was in connecting people together, and then it became converging technology; going forward, it will be more about the insights and decision-making you enable for the customer. Connecting robots doesn't matter without analytics, he said.

Asked by Fortune's Andrew Nusca about the commoditization of hardware, Robbins said the gross margin on hardware products last quarter was higher than it has been in the past two or three years. And he defended the company's work on its own specialized hardware, saying the Internet "runs on high performance silicon," and that this wasn't going to change anytime soon. "We should use software anyplace we can, and use high performance silicon where we need it."

Robbins noted that Cisco has 28,000 engineers, 23,000 of which are software engineers, and that the company historically has monetized software through a box that integrated hardware and software. But now, he said, the focus is on software where you can iterate quickly, which means bringing in some new talent.

He said the company is in the middle of a "massive transition" and is focusing on looking at the things that have made Cisco great in the past, and figuring out whether they will make Cisco great in the future, or hold it back. Robbins talked a lot about transparency and being clear with the team, as well as being able to make decisions with only 80 percent of the information they need, knowing sometimes adjustments will have to be made.

Cisco has made 15 acquisitions since he was announced as CEO, focusing on cloud, security, and analytics, and said the kind of analytics the company wants to be involved with are those associated with Cisco's core capabilities, such as pulling data out of networks.

The conversation started with a comment on him being CEO for a year, with Robbins joking, "Sure it's not five?"

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About Michael J. Miller

Former Editor in Chief

Michael J. Miller is chief information officer at Ziff Brothers Investments, a private investment firm. From 1991 to 2005, Miller was editor-in-chief of PC Magazine,responsible for the editorial direction, quality, and presentation of the world's largest computer publication. No investment advice is offered in this column. All duties are disclaimed. Miller works separately for a private investment firm which may at any time invest in companies whose products are discussed, and no disclosure of securities transactions will be made.

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