Intel’s Recovery Realization; Company executives admitted that their fixation on personal computers blinded it to the reality that computing intelligence is traveling to ever-smaller things

NOVEMBER 21, 2013, 11:10 PM

Intel’s Recovery Realization

By QUENTIN HARDY

SANTA CLARA, Calif. — In the temple of technology, Intel has confessed to straying from the true path. That may prove to be the start of salvation for the company, the world’s largest maker of semiconductors, but at a price that is yet to be known. Thursday’s annual meeting for Wall Street analysts at Intel’s headquarters here didn’t take long to get to the mea culpa. “A year ago, I was personally embarrassed that we seemed to have lost our way,” Andy Bryant, Intel’s chairman, said in his opening remarks. “We’re paying a price for that.”The problem, Mr. Bryant and others said, was that they had lost sight of a key point of a “law” named after Intel’s co-founder, Gordon Moore, that calculates semiconductor density will double every 18-24 months, with no added cost.

Put another way, Moore’s Law suggests that just as computing moved from big mainframes to smaller computer servers and on to PCs, the evolution would continue on to smartphones and tablets, and then to even smaller devices. Moreover, the growing power of semiconductors makes the computers inside giant data centers ever more powerful.

“The future is simple, computing devices are going to be smaller,” Mr. Bryant said. “We were in denial of tablets, that put us in a hole, and we’re paying the price for that.” Because it fixated on its highly profitable personal computer business, Intel missed something bigger.

Brian Krzanich, Intel’s chief executive, told the room that Intel was working hard to rectify the situation, with different chips for robots and sensors, tablets and lightweight computers, mobile devices, and big data center computers.

“Wherever it computes, wherever the need is, we want to do it best,” he said. “The key thing you guys have to understand is that it is inclusive, spanning everything we do.”

Even with that clear-eyed stance, Intel executives did seem to suggest a somewhat improbable future that consistently favored Intel’s favorite areas, particularly PCs. Consumers will be drawn to new Intel-based PCs, which in 2014 will increasingly offer features like detachable screens that become tablets, gesture-based navigation, and a wealth of operating systems. Businesses will want more PCs.

Businesses will also build their own cloud computing systems, Intel executives said, because it will be vastly cheaper to own them than to use public systems like Amazon Web Services. Amazon has argued that its service is cheaper.

In 2011, Intel projected revenue from business would grow 13 percent this year, but it fell 1 percent. Intel now projects business revenue will rise 8 percent by 2017.

The cloud business, along with high-performance computing and telecommunications sales, is expected to grow in excess of 20 percent in that time, Intel said. That could more than make up for a shortfall, should Intel have to cut prices or be disappointed in its still-critical PC business.

Renee James, Intel’s president, also talked about offering cloud services, like security, and chip manufacturing services, which could also give Intel a new revenue base as it comes to terms with its PC-centric past. The future, as one executive said, is a world in which “everything that has electricity will have intelligence,” and that will ultimately be the base of Intel’s new model.

Still, at the end of the session, Intel said it would be investing more heavily in tablets and cloud, a little bit less in PCs and phones.

For all the difficulties in some of the particulars, Wall Street seemed to like the message, as Intel shares rose almost 3 percent over the day.

Even if you don’t own the stock, you can admire how clearly the company that gave you Moore’s Law now sees what that law is doing to the world.