Memory, Microprocessors, Communications
When Intel (INTC) was in the memory business, the reality came to the leadership that Microprocessors were going to be the new direction of the company. Once begun, the shift was complete and total. Intel was out of the memory business. It was a very dramatic time and included many upheavals.
Now another big challenge arose not too long afterwards, where another opportunity came that Intel would have to deal with in a different way.
When they got out of the memory business, the choice wasn't that difficult to move to the new focus, as the microchip offered much more potential for the company.
But when the microprocessor business was going on all cylinders and future growth all but ensured, the opportunity to get into communications presented itself, which had even greater potential than microprocessor's. Their opportunity was in connecting all the computers together, which was faster growing than their microprocessor business.
In this case, the company couldn't simply walk away from one of the most lucrative businesses in the world, while they still enjoyed the leading position 
within that specific business. It was different than leaving the memory business.
Grove described the challenge like this: "We cannot (a) reposition the focus of the company or (b) reduce our expenditure rate and size the company to the new opportunity without damaging our core business."
What he had to figure out was "a shift in emphasis not from A to B (as described above) but from A to A + B - which is actually harder in some ways."
The reason I'm bringing this all up is to understand a different side to cannibalizing a product or service. It was unthinkable for the company to get rid of their microprocessing unit to pursue the faster-growing communications opportunity. Time has proven that decision right.
Of course this is a little different than the way we usually think of cannabilizing in that it's usually connected to the product category you're in. But in this case, the results would have been the same as if they had. They dropped the memory business, they weren't going to drop the microprocessor one.
In this case, Intel went against the grain of conventional wisdom and kept the microprocessing focus, while going into the communications business. All of this was happening when the tech industry had gone into a recession.
Should have they spun something off at the time so that it would only deal with the new communications focus? Possibly. It was a risk on both sides. Intel and Grove understood that eventually the chip market would mature and growth would stablize. It was already starting to happen. In communications they saw years of growth ahead, which they coudn't pass up getting in on.
The challenge was how to balance their core microprocessor business with a totally new focus on a completely different product outside the core product; something that most companies can't successfully navigate. In most cases it shouldn't even be tried in my estimation.
It's an interesting, unique case study where the company knew of a future they couldn't pass up, and a past they had to keep. It shows that in some cases there are times when a company is able to not drop an entire business product to pursue a new one.
In this case part of the reason was there were some in the Intel company that knew the market that communcations represented. That was a major factor in going after it. The results could have been different if they did it with absolutely no understanding of what they were getting into.
Other Andy Grove Resources:
Andy Grove's Rational Exuberance
The Digital Age . . . driven by the passion of Intel's Andrew Grove
The History and Influence of Andy Grove
Andy Grove enters new post-Intel role as activist capitalist
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