Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: stak who wrote (140414)	8/6/2001 10:17:14 AM
From: stak	Respond to of 186894

The Intel insider By John G. Spooner Staff Writer, CNET News.com Aug. 6, 2001, 4:00 a.m. PT Paul Otellini once seriously considered becoming a lawyer. Then he reconsidered--a smart decision: After twenty-seven years in the trenches, he’s now one of the highest-ranking executives at Intel. Throughout that long career, the 51-year-old Otellini has played a part in many of the important events shaping the company. His various roles have ranged from managing relations with IBM in the early 1980s to running sales and marketing for the entire company. He oversaw Intel’s push into Ethernet silicon and PC chipsets and also served as technical assistant to former CEO Andy Grove. Since 1998, Otellini has been in charge of the Intel Architecture Group, which means he is responsible for PC, workstation and server processors as well as research and development. And ever since the transfer in power last year that officially elevated Craig Barrett to CEO, Otellini has been frequently mentioned as one of the top candidates to be next in line for the No. 1 job at Intel. But that's--possibly--the future and Otellini has more than enough on this plate in the here and now. The challenges are increasing, what with the drop-off in the economy in the last year and a half as well as stepped-up competition from rival Advanced Micro Devices. What's more, Otellini has to keep his eye on the payoff from a restructuring of Intel's microprocessor business in the last year as he looks to refashion a more nimble and responsive organization. Otellini, who spends about 40 percent of his time on the road, recently sat down with CNET News.com to talk about the business and what's on tap in the near future as Intel seeks to spur more people to buy systems based on its P4 chip. Q: You're out there in the trenches, so to speak. How does it look in the PC market right now? How does it look for the second half? Our view is that the industry should return to normal growth patterns in the second half. For long-term growth in 2002 to 2007 or 2008, our view is that it returns to the trend line. Historically the first half is bigger than the second half. Would you care to comment on the rivalry with AMD? No. What is it about processors that get people so riled up? The rabidness tends to be a very small segment of the population. The computer industry is 150 million units per year--and the number of tech zealots is under 10 percent. You and I may happen to live in that world, but it's like living in Washington, D.C. You think everyone is into politics. Can you compare 2001 to 1998, when you first stepped into your current job and the semiconductor market also took a downturn? I think it's almost an incomparable year. Depending on how the year sorts out, it's very close to being the first no growth year in the history of the PC. Based upon that, there's really been nothing in the 20 years it's been out that compares to this. I think about that a lot. Is this the beginning of a trend or a reflection of the market we saw in 1999 and 2000? I think it was the latter. Demand was above the trend line. It accelerated in 1999 and 2000. Some of that had to do with the Y2K prepurchases and there was the Internet boom. If you take 1999, 2000 and 2001 together and divide by three you get a much more accurate picture. What made you decide to cut prices on Pentium 4 in April? Was it a specific incident? Or was there a consensus inside Intel that price cuts were needed to get the chip moving? We cut the prices on every product every quarter. The April move was very consistent with that. The more interesting view of that is what we talked about in the (second-quarter earnings) analyst call where we talked about being even more aggressive with Pentium 4 throughout the rest of this year to essentially drive it into the mainstream. So were those price cuts way overblown? I do believe that the moves we made were a significant acceleration versus our prior trends. We are going to push the Pentium 4 to transition from the Pentium IIII, and we're driving the P4 down to mainstream price points from $800 on up. That was driven by three things: the health of the product, overall capacity and the introduction of the 845 chipset ahead of schedule. Does the state of the PC market worry you at all? Analysts say that the majority of PCs are being purchased at prices that range from $800 to $1200 and that there is little activity at prices above $1500. Does this mean that Intel will have to permanently change its processor pricing structure to offer lower priced chips that fit into this band? Or is this a function of the current market? That's what Celeron was all about. When we introduced it, it was to satisfy prices under $1000 and now it’s under $800. I think there's a long-term kind of secular trend here, in terms of the electronics to become increasingly integrated and (manufacturers) to pass on the cost savings. Graphics, I think, is a very good example. Most of our chipsets include integrated graphics now. For the low-end PCs, the very function of integration takes $10 to $20 out of the bill of materials. That's happening in every element of the computer. There's no need to rethink pricing. Our entire business model is set up to displace our old products with our new products.