Intel chairman: Net companies must
become self-sufficient
By Michael Kanellos
Staff Writer, CNET News.com
October 12, 2000, 5:10 p.m. PT
SAN FRANCISCO--The Internet era will continue, but it won't be nearly
as fun as it once was, according to Intel chairman Andy Grove.
Grove, speaking on a panel at Intel's eXchange conference here, told the audience that
companies, especially Internet start-ups, are going to have to become financially self-sufficient to
survive. Although the technology economy will continue to expand, investors are no longer in a
speculative mood and will abandon companies that do not cover their costs.
"The era of trickle-down investing is over, if not forever, then for a long
period of time," he said. "We have to use self-generated cash to pay
for our advertising and our infrastructure. We have to worry about
return and about investment."
Indirectly, the harsher climate will help Intel. The company, along
with Microsoft, Hewlett-Packard and other PC-centric companies, is
engaged in a crusade against Sun Microsystems in the market for
expensive, high-end servers for Web sites, databases and other
complex computing transactions. Sun leads the market, but these
companies have said that they can deliver equipment that is either
more powerful or much less expensive.
Grove didn't mention Sun by name but emphasized at several
junctures that cutting computing costs must become a priority for
Web companies. Computing costs, in fact, have always been a
consideration "except in the fairy tale years of the last two years."
"On the whole, scrutiny on costs benefits us," Sean Maloney, senior
vice president and worldwide director of sales and marketing for Intel,
added after the panel discussion.
Priceline.com founder Jay Walker and chief Yahoo Jerry Yang, who
joined Grove on the panel, expressed similar ideas.
"The market is very uncertain about companies that
aren't yet profitable," Walker said. Some of
Priceline's recent moves, such as terminating its
grocery division, have been directly related to cost
considerations. While popular, Priceline could not
justify continuing the services because of the cost
structure.
"You're constantly making these difficult decisions that are unpopular," Walker said. "There are
capital issues and customer issues, and they often don't go together."
Grove added that the Priceline concept is still in doubt. "The scalability of Jay's business model
has yet to be proven," he said.
Despite the doom and gloom, however, all agreed the Internet continues to show huge promise
as a communications and commercial platform. Yang pointed out that the Web has shifted from
being an entertainment medium to a venue for commercial transactions and research.
Peer-to-peer networking also shows promise as a medium, Yang noted, but its current popularity
in the form of Napster can be attributed more to the content available through the system--in
Napster's case, music. Peer-to-peer networks allow individual computers to trade files with each
other, mostly avoiding the centralized servers run by companies like Yahoo or Amazon.com.
"It is more the application and use than the network itself," he said. |
