Intel Unveils Reorganization to Target Markets
By Therese Poletti
SAN FRANCISCO (Reuters) - Computer chip giant Intel announced a reorganization that includes the creation of four new business groups, saying it needs to address the rapid segmentation of the PC industry.
The personal computer industry is large and growing rapidly. As a result, the industry is splitting up into large segments," Intel President Craig Barrett said in a statement. "We plan to differentiate our products to serve these segments. "
The four new business groups are the Consumer Products Group, the Business Platform Group, the Small Business and Networking Group and the Digital Imaging and Video Division, the world's largest maker of computer chips said.
If anyone ever needed any confirmation of the rather dramatic changes taking place in the personal computer business, this is it," said Drew Peck, an analyst at Cowen & Co. There is no way Intel would take on such a massive and expensive reorganization unless there was a compelling need."
Intel's stock fell $2.125 to $78.125 on Nasdaq, where it was the most active issue on volume of more than 14 million shares. The drop in Intel stock was part of an overall decline in technology stocks.
Analysts said Intel has realized it needs to develop an ever wider range of chips as the PC industry diverges into even more differentiated areas, ranging from the sub-$1,000 PC at the low end to the high-end PC/TVs for consumers that average around $5,000, to costly commercial PCs and workstations.
The Santa Clara, Calif.-based company said its former Desktop Products Group will split into the Consumer Products Group and Business Platforms Group.
The company has clearly set up as their aim in 1998 to proliferate their brand and products as the PC market segments, " said Mark Edelstone, a Morgan Stanley analyst. "This is the new management organization to take advantage of different segments."
Under the new structure, Computer Products will be headed by Vice President Mike Aymar and the Business Platform Group will be headed by Vice President Pat Gelsinger.
The Computer Products Group will include consumer desktop PCs, TV set-top computing devices and automobile PCs, a much- discussed area at the Comdex computer show last week.
The Business Platform Group will focus on all business computers, including PCs, network computers, NetPCs, workstations, and data security for PCs. Analysts said they expected this group would be Intel's biggest profit center, but they do not expect Intel to break down revenues or profits for its business groups.
Intel's former Internet and Communications Group will also split in two.
Executive Vice President Frank Gill will lead the Small Business and Networking Group, including networking products, management software, business communications such as its ProShare video conferencing technology, and Internet services operations.
Vice President Craig Kinnie will head the second group to be created from the Internet and Communications Group, the Intel Architecture Labs. The unit will develop technologies for emerging hardware platforms and other technologies.
Intel's Computing Enhancement Group will continue under Vice President Ron Smith and will keep its focus on peripheral chips associated with the PC and its communications business.
The Digital Imaging and Video division is being formed to focus on the emerging fields of digital imaging and video associated with the PC and stand-alone digital cameras. This division will be run by Don Whiteside, who was previously in the sales and marketing organization, serving large accounts.
Their goal here is to sell cheap products to cheap consumers and expensive products to price-insensitive consumers, whether it's corporate users or whatever," Cowen's Peck said, adding that he believes the reorganization will be costly because Intel may have separate marketing and research and development organizations for each group.
An Intel spokesman said there is nothing planned specifically in terms of adding jobs, but the likelihood is that probably some people will be added. Intel said its manufacturing and sales organizations serve all its products but that marketing is usually tied to product groups.
Intel is responding pretty smartly to a number of changes in the marketplace," Peck said.
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