NEWS ANALYSIS : Intel’s Handling of the Pentium Defect Chips at Its Image
Intel Corp.’s handling of the outcry over the flaw in its Pentium microprocessor is shaping up as a textbook case of how not to handle a crisis, management experts said Monday. As did Exxon Corp. after the Valdez oil spill and USAir after its recent string of plane crashes, Intel is turning a difficult but isolated problem into one that threatens long-term damage to the company’s reputation.
“Everybody will have a crisis sooner or later. The key is how you respond and accept responsibility,” says Ian Mitroff, director of the USC Center for Crisis Management. “I don’t think they’ve done very well.”
Intel’s bungling began when it discovered the flaw in the Pentium last summer and decided not to tell anyone, reasoning that the flaw would affect hardly anyone and that it was all but commonplace for a complex microprocessor to have a few bugs. After a Virginia mathematics professor discovered and publicized the flaw, however, Intel’s secrecy looked suspiciously like a cover-up.
Then, when it was forced to acknowledge the problem, Intel dismissed the chances of its causing problems for the average user as exceedingly rare--once in 27,000 years.
Bad move, say crisis management experts. Statistics are a classic defense in such situations, but they are unpersuasive at best and genuinely misleading at worst.
“Probabilities are always off,” says Mitroff, pointing out that few believed Exxon’s claim after the Valdez spill that such an accident would happen only once in 250 years.
Intel’s statements are already looking suspect now that IBM has concluded that a Pentium user could encounter problems as often as once every 24 days.
Another blunder: Intel has offered to replace the chip only in cases in which it believes the flaw could cause a problem--a classic case of focusing on the short-term problems caused by the crisis rather than on the more important long-term issues.
“They should take (the chips) back, no questions asked,” says Larry Kamer, a San Francisco public relations executive. “They have a good, solid reputation that they have spent years and millions of dollars to develop. That’s the equity they have to protect.”
By refusing to replace the chips for any customer who asks--especially when Compaq and IBM have both offered to do so--Intel “comes across as the bad guy,” Kamer says.
The Pentium debacle is following the path of the classic “crisis” as described by David Umansky, a crisis management expert in Baltimore. He says a crisis begins with a surprise occurrence, develops in an atmosphere of insufficient information, results in an increasing flow of events, loss of control, siege mentality, intense scrutiny from the outside and short-term focus.
The critical action required of Intel, Umansky says, is to be more open and communicative about its view of the situation. “If you’re not, you’re leaving the media to say what the problem is and what should be done about it.”
“It’s almost irrelevant what Intel says. If IBM thinks it’s a problem, it’s a problem,” Mitroff says.
Already there are signs that the problem is undermining Intel’s reputation, just as the company is spending hundreds of millions of dollars to build a brand image among consumers. On the Internet and elsewhere in computing circles, the jokes are flying. One refers to the widely displayed “Intel Inside” logos on PCs that use Intel chips. Goes the line: “Intel Inside, Can’t Divide.”
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