The company turned a minor problem-a tiny flaw in its flagship Pentium chip-into a major corporate crisis late last year by keeping mum till word of the defect swept over the Internet and into the headlines.
Before Christmas, Intel belatedly began acting like the smart marketer it aspires to be by proclaiming the customer is always right: It agreed to replace any or all Pentium chips, taking a $475 million pre-tax charge and casting aside its probably correct assertion that most owners of Pentium-powered PCs have no reason to switch chips.
Then last week, Intel boldly announced it would broadcast news of all its future chip imperfections over the Internet, leaving it up to the market to decide which flaws are worrisome and which are irrelevant.
"It's a magnificent step. I congratulate them," said Gerald Meyers, a crisis management expert.
There are risks: The masses now will know what tech sorts have long known, that computer chips aren't perfect. Intel, in showing its warts, could scare some buyers away from new products.
Yet observers say Intel's action will force smaller chip rivals, and possibly marketers of software and other computer products, to come clean on their flaws, too.
The plan to confess all on the Internet and continue an aggressive consumer ad campaign, from Dahlin Smith White in Salt Lake City, could boost Intel's credibility.
J. Scott Briggs, president of Ziff-Davis Publishing Co.'s Consumer Media Group, said most consumers will never look at the mountains of technical information but will come away impressed that Intel must be a good company if it has the confidence to divulge minute technical shortcomings. It also will raise the stakes for Intel to release only high-quality products so it doesn't ever have to disclose a true lemon.
"I think it is a brilliant move, and it's absolutely the thing they had to do to get back in control of this issue," Mr. Briggs said. "What they're going to do is overwhelm you with detail." That's smart, he added, given Intel was flamed for withholding information before.
Mr. Meyers noted another lesson: Intel's action shows it is possible to recover quickly after initially bungling a crisis.
Intel has dodged a bullet. Pentium PCs have been selling at a record level, thanks in part to heavy holiday advertising that Intel kept on the air during the crisis. And "1995 will definitely be the year of Pentium," said Intel Senior VP Carl Everett, who expects Pentium this year will displace the 486 chip as Intel's volume leader.
Intel has convinced consumers that Pentium is a faster, better way to compute. "It's fundamentally a great product," said Dennis Carter, Intel VP-corporate marketing. Indeed, the fastest way to learn about Intel's imperfections on the Internet may be with a Pentium PC.
Richard Skews coordinates Marketing Technology.