Positioning for the Future

Intel initiated a company-wide restructuring plan in 2006 to bolster its flagging product leadership position and improve its efficiency and effectiveness. Stacy Smith, then the assistant CFO, led the effort, which has resulted in compound annual revenue and earnings growth of 9% and 23%, respectively. The initiative trimmed Intel's employee headcount, reduced its layers of management and produced $7 billion in annual productivity gains. Smith, who was named CFO in 2007, notes the company was fortunate to begin the initiative before the financial crisis. He discusses how the crisis has impacted Intel and the issues facing finance departments.

T&R: What safeguards against future financial crisis has Intel adopted?

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Smith: Intel had a relatively conservative profile with our excess cash even prior to the financial crisis, so our portfolio was not significantly impacted. Since the crisis we have tightened our credit policies somewhat, especially with banks. We continue to lend to European sovereigns and banks, but only ones of the highest credit quality. We've also invested a small portion of our portfolio in U.S. [Treasury] bills to provide the ultimate liquidity in case of a future crisis.

T&R: How did the financial crisis impact the role of the CFO?

Smith: We were well positioned going into the crisis because we had done our restructuring the year before. I did spend more of my time focusing on liquidity. That said, I am fortunate to have one of the best treasury teams in the world and they had done a good job of anticipating the issues and positioning the company for optimal safety without taking big write-downs. That allowed me to continue to focus the majority of my time on business execution and strategy. Ultimately, we made some decisions in the downturn that accelerated product development, and we built some leading-edge factories at a time when others were pulling back. In my mind, those decisions set the stage for the record results we are currently achieving.

T&R: What does Intel see as the most important finance-department issues looking ahead?

Smith: Intel's finance organization charter is focused on maximizing shareholder value. This includes a focus on maximizing and growing profits, ensuring legal compliance, effective risk control, and developing world-class financial professionals. Each person in the finance organization knows this charter and tries to live up to it every day. And interestingly, most of the company would tell you this is what they expect out of finance, albeit in their own words. They hold us accountable to this charter.

T&R: Still from a finance perspective, where are the biggest opportunities and risks?

Smith: The market for computing is exploding, ranging from high-end ultrabooks, to tablets, smartphones, security systems and even in-vehicle technology. And all of these devices compute and connect to the Internet, which drives a build-out of global server infrastructure that these devices connect to. Intel is uniquely situated to benefit from this trend, which makes this time in our history very exciting. From the finance standpoint, we are actively partnering with the business to get the right strategies in place, to drive execution, and to deploy resources in places where we can maximize return for our shareholders.

In terms of risk, I continue to worry about another economic shock. At the end of the day, our market growth correlates to GDP growth. So this is something we watch and prepare for. That is the part of the charter where we look at risk and make sure we have the right controls in place and are positioned conservatively. This ensures that we can thrive and create distance between us and the rest of the market if there is another downturn.