I can't believe how excited I can get about a company this big.
Some Dow Jones news:
Review:Intel Moves Beyond Mfg As Lower PC Prices Slow Growth
By Charles Bickers
HONG KONG (Dow Jones)--Craig Barrett, chief executive of semiconductor giant
Intel Corp. (INTC), completed a five-day Asian tour at the end of April with
the confidence of someone who will find friends in every port. Technology
companies are dominant and successful, especially those from the U.S., and few
companies more so than Intel. And with Asia now the manufacturing hub of the
personal-computer world, everyone wants to know Intel's moves.
For years, Intel executives have conveyed the same message: Buy the best
personal computer you can afford so you don't fall behind as technology charges
ahead. With Intel focused on dominating the market for the highest-performance
PC chips, the company benefits from PC sales of almost any kind.
This year, the message is different: Barrett used his tour as a platform to
underline Intel's shift from a pure manufacturing operation to a diversified
communications and technology company, reports the latest edition of the Far
Eastern Economic Review published Thursday. The fundamental drive behind that
move is the reduced potential for earnings growth in PC-processor
manufacturing. Although unit sales are still expanding, particularly in China
and India, computer prices are just too low to maintain the company's profit
growth.
"If you look at Intel over the past decade it has grown at around 30% per
year," Barrett says in an interview. "We're not going to grow at 35% or more -
we're just too big." He says the company isn't abandoning its core business of
making processors, which contributes about 80% of revenues and nearly 100% of
profits. Instead, it's going to develop new or recently acquired operations
centred on the Internet. "We intend to provide the building blocks for the
Internet," says Barrett.
Intel plans to develop three new areas: manufacture of communications-network
equipment, provision of Internet services and creation of "server farms," a
network of high-capacity data-storage facilities.
The move into Internet services is Intel's biggest shift away from its
chip-making roots. The company's joint venture with Pacific Century Group in
Hong Kong, called Pacific Convergence Corp., will provide high-speed Internet
services to Asia - in the process competing with telecommunications companies
such as Hong Kong Telecommunications Ltd. (HKT).
Sees Taiwan As Future Driver For PC-Based Devt
While U.S. technology makers migrate to service industries in search of
higher margins, Asian manufacturers are likely to benefit from more room for
innovating in the PC business, says Barrett. He contends that for hardware,
Taiwan is fast becoming the world's major design center for the PC industry.
Already, most of the world's notebook computers are designed and built in
Taiwan, and Barrett foresees the island moving on to higher-performance
computers such as servers and workstations for advanced applications.
Indeed, Barrett sees Taiwan not only as the future driver for PC-based
development but also as home to some of the best business models for the
technology industry. He has particular admiration for Taiwan Semiconductor
Manufacturing Co. (TSM). TSMC focuses solely on making chips, unlike Intel,
which is involved in the entire design-to-sale process. Barrett wants Intel to
occupy a similarly specific niche in the data-services industry, selling space
and time on the server farms.
One country Barrett doesn't see as offering much of a challenge in the
computing sphere is Japan. "They're still capable of excellent engineering and
they're creative in the consumer-electronics space, but they are not world
leaders in computing," he says. "They just continue to find themselves in a
difficult position." Despite recent announcements of restructuring, Barrett
says none of Japan's major companies have undergone anything like the
structural changes that most U.S. technology firms have.
PCs To Remain Dominant Computing,Internet Access Tool
For all the changes in Intel's business direction, Barrett is adamant that
PCs will remain the dominant computing and Internet access tool. He dismisses
the idea that mobile phones or organizers might make PCs redundant: "I hear all
of this, and frankly our industry is full of hype." The most successful non-PC
information devices to date are handheld organizers such as 3Com's Palm Pilot
that complement the PC, he says. Intel is continuing to develop its StrongARM
processor for just such devices.
Those who predict the fall of the PC didn't bank on service providers giving
them away for free, he adds. Already, stand-alone PCs are selling in the U.S.
for under US$400; and, much as mobile phones are offered cheaply to lure new
users into the wireless world, so too some Internet service providers in
America are marketing free PCs to drum up customers.
But for all his defence of the PC, Barrett is conscious of its shortcomings.
After 20 years the personal computer is barely any easier to use - a fact that
holds many back from venturing onto the Internet. "Eventually we will
collectively get our act together and PCs will be easier to use," says Barrett.
"There's no reason why PCs can't be run like TV sets."
(END) DOW JONES NEWS 05-05-99
08:02 PM
- - 08 02 PM EDT 05-05-99
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