WSJ story:
April 27, 2000
interactive5.wsj.com
Intel Looks to Expand Offerings,
Boost Demand for Web Services
An INTERACTIVE JOURNAL News Roundup
NEW YORK -- Intel Corp. executives on Thursday laid out the company's broad strategy to tap into Internet-driven demand for silicon chips and expand outside its traditional realm of services.
At its semiannual meeting with analysts in New York, top Intel executives talked about the company's ever-multiplying business lines. "We're in the middle of a fairly sizable strategic shift," Chairman Andrew Grove said in his introductory remarks at the meeting.
Intel Beats Earning Estimates on Strong Demand for Chips (April 19)
Intel has spent large amounts of money on acquisitions and other initiatives to increase its presence in nonmicroprocessor markets, such as chips for mobile phones, networking equipment and handheld devices. The company also wants to expand into nonhardware businesses, including e-commerce service.
"The key factor that is motivating us is the realization that the Internet is run by silicon," Mr. Grove said, adding that the company, with its diversifying operations, "is motivated by our desire to simply follow the bits as they traverse the Internet infrastructure."
Intel executives believe that by accelerating the construction and advancement of the Internet, Intel can create stiff demand for its core silicon products. Executive Vice President Paul Otellini, head of Intel's core microprocessor operation, said the biggest opportunity for Intel lies in providing services to help companies build their online businesses.
Intel plans to dedicate about $100 million toward the effort. The company hopes to tap customers outside its normal arena, providing consulting services and high-tech information to application-service providers and other Internet companies.
But Intel reaffirmed the company's focus on its core strategy of controlling the microprocessor market. Mr. Otellini said demand for processors will be stronger in the second half of 2000, and he shrugged off arguments by industry watchers who predicted that "the PC era was over."
Intel recently conceded it underestimated PC demand for much of the last year. But the company had said demand for its key microprocessors remains strong and had announced plans to spend an additional $1 billion this year on chip factories to meet that demand.
Mr. Otellini, who took the stage after Mr. Grove, detailed some of the new products that will ship this year. Intel in the second quarter will ship a new chipset for mainstream PCs and by midyear will ship a new line of Intel-branded terminals designed for Web access.
In the second half of the year, Intel will begin shipping the newest version of its delayed Celeron processor, code-named Timna and running at 600 megahertz. Intel also will the much-heralded Willamette processor, which runs at 1.4 gigahertz in the second half.
The company, which has been converting its factories to 0.18-micron manufacturing technology from 0.25, has completed about half of its transition, Mr. Otellini said. By year end, 90% of all microprocessors will be use 0.18-micron technology, allowing the company to build more-efficient chips at lower cost, thus boosting profit margins.
Mr. Otellini also touted the company's success in selling processors for high-end computer servers. He said Intel now holds 53% of the market for servers costing $10,000 or more.
He said Intel is quickening its push into the highest of the high end: Supplying chips for the refrigerator-size, industrial-strength servers used by big corporations to tackle the biggest number-crunching jobs. Intel has traditionally been outside that market because its chips weren't considered sophisticated enough. Mr. Otellini said that it was Intel's lower-cost chips that lured customers to its business. "As we look forward," he said, "it's not just price performance we're good at, it's absolute performance." |
