Dan, Re: "Look, I'm trying to not be a jerk about all this, but the main thing Intel has going for it, right now, is momentum."
Ok, no insults from here forward (from me). You have shown the breakdown of Intel's business groups, and you are trying to argue about Intel's momentum being their strength, except their future efforts are their weakness.
If you want to concentrate on Intel's core breakdown, let's concentrate on that, and not change the subject.
The obvious largest downfall in Intel profits is from the "All Other" group. Do you know what this represents? First, it includes Intel's New Business Group (NBG), which continually gets pumped with cash without needing to turn out anything productive, just in the hopes that something interesting might turn up. While this is a great group to invest in when things are going well, these days Intel should probably organize this group, cut the fat, and sell off what isn't profitable. There is a potential savings of over $650 million.
In point of fact, Intel has been eliminating some business groups. The IOS group, which did those web services, has been shrunk considerably. It may now be at the point where it can offer services, and actually make a little money. The Intel toys division was cut entirely, so you won't be seeing any more Intel Microscopes, or anything else along those lines. These sacrifices are worth it, and I believe that Intel can save a lot by eliminating the dead weight in that division.
Moving on to the Intel Communications Group (ICG), we see a division that is losing a couple hundred million dollars per quarter, but the product lines that they have might be very pertinent for the future. 10 gigabit ethernet, for one, is a technology that a lot of large businesses are demanding, and Intel is one of the only companies offering robust solutions in this area. Optical networking is another, and Intel is currently leading progress in this, too. Intel also has the most complete line of single chip gigabit ethernet products, as well as a complete line of switch and router products. The networking market may be down in the dumps right now, but the Internet certainly isn't finished, so it's only a matter of time before this market picks up. Since Intel has all these solutions ready, it will be simple for them to gain a lot of revenue in the coming years.
Next is the Wireless Communications and Computing Group (WCCG), which includes Intel's flash division, their X-Scale and StrongArm processor lines, and development on wireless networking protocols, such as 802.11b and 802.11a. Expect Banias to offer a lot for this group as well. Even though Banias is an IAG project, it also will boost demand for wireless networking, thus putting this buisiness well into the black. They are already close to making money right now, and last year they made almost $150 million in the third quarter. X-Scale and StrongArm continue to get major design wins, and Intel is leading the market in .13u flash products. WCCG looks to be a money making division going forward.
Lastly is IAG, and I know you have the largest problem with this division. However, if you look at current profits from this division, Intel made more than $1.3 billion last quarter, just from IAG. With the market going up, and ASPs stabilizing, I can't imagine this going down in the short term.
You do have a problem, though, with Itanium, Pentium 4, and Rambus. Understandably, the first generation of Itanium ended up being much more of a niche product than anyone imagined. Renewed competition from IBM and others, may make Itanium a hard item to sell. On the other hand, McKinley is right around the corner, promising at least 70% more integer performance, and Madison will arrive 6 months later on .13u manufacturing, pushing clock frequencies up high enough to give tons of integer and floating point performance. Deerfield will come out shortly after Madison to offer a lower cost Itanium chip for 2-way and 4-way servers. If you have a problem with Itanium, I suggest you at least wait until these chips launch before burying the axe.
As for Pentium 4, Northwood will launch in January, the Xeon processor will be implementing Hyperthreading later that quarter, and DDR chipsets will finally arrive. While Rambus has failed, Intel is still picking up the pieces with DDR, and it looks like they may find similar performance with the lower bandwidth, lower latency DDR memory. Therefore, Rambus may have been a mistake, but Intel is able to make something else work for them. Before you bury the axe in Pentium 4, I suggest you wait for Northwood and DDR, not to mention 533MHz FSB and Hyperthreading.
Overall, I don't understand how you can question Intel going forward. It looks to me that the momentum that you mention will carry them with new products, and new technology. AMD will have a Hammer chip, but who's to say how Intel will fare against it? AMD has a lot to live up to, and they've proven that it's hard to gain market share, even with a superior product. Getting to 20% was easy for them, but getting very much past that has been a chore. Sure they've wasted Intel a little in the process, but not without serious sacrifices.
Therefore, I would be interested to hearing your side of Intel's three main business groups, and where you think the largest faults are (notwithstanding Pentium 4 and Itanium, since I already know what you think of these).
wanna_bmw |
