Petz and thread:
anyone posted the Forbes article on the Intel thread?
No, but here's another article that could be posted from Forbes.....
-Scot
forbes.com
Intel's annum horribilis
By Om Malik
The word from Intel's (nasdaq: INTC) sprawling campus in San Jose, Calif., is that Dr. Craig Barrett, the cerebral, sometimes professorial chief executive, is a very angry man.
Barrett has good reason to be upset. Those familiar with the company say that Intel is having problems with its next big chip, the Itanium. Formerly known as Merced, the much-delayed chip is expected to hit the market in the summer of 2000.
Intel is said to be having trouble getting optimal performance out of the chip at speeds above 700 megahertz. "It is premature to speculate," says Intel spokesperson Michael Sullivan in the company's defense. "The fact is that we are shipping developer systems that are running at 400 MHz to 600 MHz." He adds that when Itanium ships, it will be at much higher speeds.
While the 600-MHz version of this chip is reportedly working fine, sources say that excessive heat generation and the large die size are two major issues that could seriously hamper the chip.
This just might be the latest snag to hit Intel. The company, which had $29 billion in sales for 1999, has been hit by numerous problems this year even though it is tough to find signs of that in the company's sales data or stock price. The stock is trading at $78, up roughly 30% for the year.
Nevertheless, the problems are there. For much of the 1990s, Intel has been known as the most efficient technology company in the world. Under the leadership of now Chairman Andy Grove, Intel became a fearsome chip machine that excelled at squeezing maximum profits out of its chip manufacturing facilities.
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Ironically, 1999 was supposed to be the year when Intel was supposed to leave the competition behind for good.
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But this has been a year of major product delays, design flaws and production shortfalls. Currently, the world's fastest PC processor, the 750-MHz Athlon, is not manufactured in San Jose, but instead in Sunnyvale, Calif., the home of rival Advanced Micro Devices (nyse: AMD).
Linley Gwennap, the respected industry pundit and editor of The Microprocessor Report, a Sebastopol, Calif.-based newsletter, thinks it is the law of averages catching up with the chip giant. "The chip business is a tough business and the schedule slips happen quite often," he says.
Everyone from Sun Microsystems (nasdaq: SUNW) to AMD has faced this problem at one time or another, Gwennap points out. "I think for the past few years Intel was on a roll and we forgot that this could happen to Intel as well," says Gwennap. "For a couple of years they managed to get some products out on time without any snags. Now I think the odds are catching up with them."
Ironically, 1999 was supposed to be the year when Intel was supposed to leave the competition behind for good. Many of its rivals, such as Cyrix and Rise Technology, have withdrawn from the x86-chip business altogether.
It all began in February 1999, with the first murmurs of a delay in Intel's new Rambus-enhanced chipset, the i820, popularly known as Camino. The chipset is yet to be introduced, despite an official launch date that was set for September 1999. At the same time, Intel's plan to embed processor serial numbers in its chips had caused an uproar and the libertarians and privacy advocates were up in arms.
Their protests had not yet died down by June, when Via Technologies, a small Taiwan-based chipset maker, managed to rally the entire motherboard and chipset community around its PC-133 synchronous memory standard, leaving Intel as the only champion of Rambus' (nasdaq: RMBS) high-speed memory technology
continued from "Intel's annum horribilis"
The very next month, archrival AMD introduced its K-7 chips. Also known as the Athlon, it marked the first time that AMD had a chip on the market that ran faster than Intel's best offering. Intel has not managed to regain the speed crown since.
The prospects of Intel regaining the lead don't look good either. AMD has already started churning out Athlon on the 0.18-micron manufacturing process, which has given the perennial also-ran a chance to win the megahertz derby. Intel, on the other hand, still produces its chips using a 0.25-micron process.
Then came the big shocker: On Oct. 26, a day after the company announced its cutting-edge Pentium III Coppermine chips, internal documents showed that production capacity would not be able to meet the demand for these highly profitable processors. For a company that makes microprocessors for a living, faulty forecasts are a death knell.
"It is quite clear AMD is pushing them and Intel is taking chances," says Dan Scovel, semiconductor analyst with Fahnestock & Co., a New York-based brokerage. For years, he says, it was AMD that was under pressure, and now the roles have been reversed.
Scovel thinks these are issues that are likely to surface when a company reaches the size of Intel. "The logistics of running such a large corporation growing at such high rates are quite large," he adds. These logistical problems are often encountered by old-economy companies such as carmakers, which are forced to recall vehicles, for example, because they used the wrong kind of seatbelts.
One of the biggest issues Intel has to grapple with is its multiple product lines. With at least four major microprocessor lines (Celeron, Pentium II, Pentium III and Xeon) and multiple chipsets, analysts believe that Intel has to rationalize its products and simplify the offerings.
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It is no surprise that everyone from big fund managers to your manicurist wants to be aware of the chipmaker's every move.
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"Intel is leaving too much money on the table this quarter. They have too many products and need to rationalize the lines," says a New York-based fund manager, who is a long-term bull on the company.
"They are putting all the sources to bear, and I am confident that they will be able to fix all the issues," says Ashok Kumar, technology analyst at U.S. Bancorp Piper Jaffrey.
Brave words, for none of the issues Intel has been grappling with have been completely resolved. For example, in November, AMD released a 750-MHz version of its Athlon, and is likely to announce an even faster 800-MHz version of the chip early next year. The processor serial number (PSN) row has once again made news and there's still a shortage of Intel i820 and i840 Rambus motherboards.
The Microprocessor Report's Gwennap thinks that the glare of the spotlight is the problem. Intel is being put under the microscope and being watched very closely. With 3.4 billion shares outstanding, and a market capitalization of $262 billion, it is no surprise that everyone from big fund managers to your manicurist wants to be aware of the chipmaker's every move.
Barrett and company need to learn to live with such constant scrutiny--that is the cost of being the biggest and best chip company in the world. |
