Intel in Slide
techweb.com
April 01, 1999, Issue: 1004
Section: Analysis
Intel in Slide
Mike Elgan
Labeled the "amazing profit machine" by Forbes magazine, Intel has a long
history of industry domination and spectacular profit margins. Intel chairman
Andy Grove was Time's 1997 Man of the Year. As recently as this January,
Intel announced record earnings and revenues. But those halcyon days are
gone. Or are they?
No doubt about it. Intel is a company under siege:
- The company's market share in PC microprocessors is taking a nosedive-it's
down from 87% in Q4 of 1997 to 76% in the same quarter of last year
- Rivals AMD and Cyrix are coming on strong. AMD's market share doubled
in 1998 alone.
- Buyers used to demand Intel Inside. But now consumers and even corporate
buyers want cheap chips, and they no longer care who makes them as long as
they run Windows.
- The Federal Trade Commission is after Intel-its antitrust lawsuit was set to
begin March 9-for illegally wielding monopoly power to push around
companies like Compaq and Intergraph. Competitors are coming out of the
woodwork to point fingers; the current suit is probably only the first of many.
- Intel's profitable marriage with Microsoft is clearly on the rocks-each partner
keeps jumping into bed with other companies. For example, Intel is flirting
with operating systems like Linux and Be. Microsoft, meanwhile, supports
non-Intel chips in Windows CE. In the near future, look for the two giants to
clash over standards, alliances and overlapping markets.
- The secret to Intel's "profit machine" is to rapidly churn out ever-faster new
chips in high volume and charge a bundle for them. But chip performance now
exceeds the demands of Windows 98. For many business users, cheaper
alternatives are almost as good as pricey Pentium IIIs. (See our review of
PIII- and AMD K6-3-based PCs in this issue.)
- Finally, privacy groups are boycotting the Pentium III because of concerns
about a new feature. Intel says the ability of each chip to be individually
identified boosts secure e-commerce; privacy groups say it tramples individual
rights.
Intel is facing a tough couple of years. But I think that, in the words of Andy
Grove, the company is paranoid enough to survive, and even thrive, in the
years ahead. Here's why.
First, it won't keep handing market share to the upstarts. Intel has become
increasingly aggressive across the board, with everything from Celeron chips
for the low-end PC to Xeon products for power-hungry workstations. And
it's likely that bloated-but-powerful Windows 2000 will boost demand for the
now-mainstream Pentium III and Xeon chips.
Second, Intel is, quite simply, the driving force behind incredible PC
innovation we all take for granted. The company funnels billions into
technologies beyond the microprocessor: PCs, RAM, videoconferencing,
CAD software, networking, Internet plumbing, graphics, e-commerce, even
toys. It does this to crank up the performance of software and peripherals so
buyers have a reason to buy expensive new Intel chips.
Why should you care about all this? The bottom line of Intel's strategy is this:
Intel makes the big bucks when the entire PC platform keeps up with its
breakneck chip improvements.
But don't bother thanking Intel for the power inside your PC. Paying the big
bucks for that Pentium III is thanks enough.
Copyright (c) 1999 CMP Media Inc. |
