A Leaner, Meaner Intel?

You get the feeling Intel wishes it were summer already.

Speaking at Intel’s spring analysts’ meeting in New York today, CEO Paul
Otellini reiterated a theme heard in the chip giant’s earnings call earlier this month: Just wait until summer.

The reason? In the second half of this year, the company plans to release what Otellini
called “the largest refresh in our product line in years.”

Intel still dominates in all segments of the microprocessor market but has
been losing share to rival AMD over the past year, particularly in servers, the most profitable of the three main segments that include
desktop and mobile computers.

With AMD now solidly over 20 percent in server share for the first time in
years, Otellini sought to assure Wall Street that Intel has a plan.

“We are well
aware of the realities of our current and future business outlook,” he said
in remarks that were part of a live webcast.

Intel enjoyed double-digit growth during the past three years, with 2005 being the best
year of revenue in the company’s history. But Intel is projecting a 3 percent drop in revenue for this year and a 5 percent drop in gross
margin.

Still, the thrust of Otellini’s remarks on the health of the company focused on
what it sees as a softness in PC demand and its customers’ inventory build-up with scant attention to the competitive threats.

Intel is predicting PC
growth worldwide will drop below 10 percent for the first time in years.
Intel’s pessimistic outlook is a bit below what analysts have
forecast.

He also said Intel plans to cut a billion dollars in direct
spending from what had been projected as $12 billion for the year.

Intel’s not stopping there, though. Otellini said the billion in savings is
“insufficient.” The company plans to restructure and resize itself into what
he called a leaner, more agile and efficient Intel.

This company-wide analysis will take 90 days, but Otellini was quick to
point out that Intel will take action along the way as soon as it sees
problem areas it can fix.

While not ruling out layoffs, he said it was “way
too simplistic” to start with a reduction in its workforce. He also said
whatever actions Intel takes could well extend into 2007 and that the
company would “deal with non-performing businesses.”

Last week Intel rolled out vPro, its first business brand, a platform or collection of technologies
that PC makers can use for better manageability and security features of
particular interest to IT managers.

The first vPro systems will be based on
Intel’s “Conroe” microprocessor due later this summer.

Otellini said Conroe is more than 40 percent faster than any of the fastest
dual-core Pentium 4’s Intel currently sells and uses less power. Over time,
vPro will extend to mobile platforms.

Intel also has new mobile and server
processors on tap for later this year, including the long-awaited dual-core version of Itanium, code-named Montecito.

Otellini brushed aside concerns about Intel’s current performance, noting
that in his 32 years at the company, he’s learned technology goes in cycles.

“A new microarchitecture can change the game significantly.”

The Intel CEO conceded his company had largely been “living off the Pentium
4 architecture until January of this year” and is now ready for the next big
jump.

News Around the Web