News Bits: Intel in Trouble, iBook for June, New Microsoft Mice, MacBook Pro Problems

Intel in Trouble

Intel is in big trouble and it doesn’t seem like it knows how to get out of it. What’s the problem? AMD. It’s tearing huge portions out of Intel’s formerly most profitable areas. Intel is firing back, or at least trying to, but their strategy isn’t working because they’re shooting at the wrong target.

Right now, Intel is frantically issuing price cuts, recently a spur of the moment 10% kickback to distributors was enacted. However, it was too late to make much of a difference, as many didn’t get time to act, and it targeted the wrong components.

Intel’s new focus is on the low-end market, cutting its Celeron processors from a $50 chip price to $40, and soon $35. There’s a problem here too — although this strategy has worked against AMD in the past, it isn’t working anymore because the low-end is no longer the primary focus of AMD — it’s the high-end. Intel is shooing and hitting AMD but not doing any damage.

The reasoning behind Intel forcing distributors to get products out the door and cutting prices is due to market share — they’re flooding the market so they don’t have to announce huge market share drops during the next quarterly conference call.

Inventory buildup is yet another problem facing Intel. They’re throwing Celerons out as fast as possible, but it can’t do the same to the Pentium 4 and M because that would destroy its margins.

Intel’s problem is, basically speaking; it has to keep its profit margins up, market share up, and has to look good doing so in the process.

Q2 isn’t going to improve Intel’s state of disarray. Would starting a price war help? No, that would hurt Intel. AMD has taken over as the leader in server parts and is raising prices on them because they know people will pay a premium. Low power/high performance = AMD.

Next-gen server chip Woodcrest to the rescue or not? Intel expects it to ramp up to 20% of sales by the end of the year, but there’s one small problem — 80% of Intel’s market is still vulnerable, and that’s with the best-case scenario.

Although Intel’s bleeding will lessen for a time, it won’t be for long because AMD’s upcoming K8L is going to close the gap again, and AMD will most likely hold onto any gains they’ve made for a while.

Several problems need addressing — Intel needs a comprehensive technical plan, less distractions, and a new management team that listens to its engineers.

The platform is the real reason AMD is kicking Intel around — not the chips. They’re doing it in a cohesive technical manner, not the happy people marketing sense of Intel. AMD has a complete system approach that works together as one, and gets the right job done for the right reason.

Another problem with Intel is that they don’t focus on the part as a whole — rather, to make something better, they focus on one component — FSB, cache, etc.

Intel will continue to have problems until it comes out with a HyperTransport-like technology. Over the last few years, Intel has cancelled over a half dozen projects, including its own version of HyperTransport, CSI. Their attempts have been blurred by poor decision making and bad management.

In Q4 2008, there might be some hope for Intel, but until then, in this authors opinion it will continue to lose market share.