Intel: Inside, Upon, Within, Around; Intel CEO Seeking to Change ‘Intel Inside’ to Intel Everywhere

JANUARY 6, 2014, 10:00 PM

Intel: Inside, Upon, Within, Around

By QUENTIN HARDY

Intel is trying to make good on its promises, fast. Speaking at the preshow keynote of the International Consumer Electronics Show, Brian Krzanich, Intel’s chief executive, showed devices with Intel semiconductors that included wearable health and biometric devices, a small wireless computer for developers to put inside other devices such as appliances, and a wireless phone charger that looked like a stylish bowl.It was an impressive speech, especially in terms of the number of products displayed. What it did not spend too much time on was whether, or how, Intel could reach its old level of profitability with so many devices in so many markets.

For a company that has spent years trying to demonstrate the perennial beauty and utility of the personal computer (a very focused and profitable product for Intel), it was a big change of gears. But then, for a couple of years now PC sales have been feeling pressure from increased sales of smartphones and tablets.

Intel seems to have gotten that message. At a meeting for analysts in November, Mr. Krzanich and others spoke of how Intel had grown too fixated on the money it made from PCs. That fixation, they said, made Intel miss the fact that chips inevitably become smaller and more powerful, leading to the rise of mobile devices. Mr. Krzanich told that audience that Intel had learned its lesson, and that it would seek to put its chips into as many things as possible.

With Monday’s speech, he tried to leapfrog phones and tablets almost entirely, and talk about a world of wearable devices.

One of these was an earpiece that was wirelessly connected to a user’s phone, and could passively “listen” to its owner to be of service when needed. At that point, if necessary, it could rely on the phone for information, perhaps to make an Internet search or a voice call.

“It would talk when you’re talking, because it’s listening to you,” said Mike Bell, the head of Intel’s new devices program. “If you address it directly, it wakes up.”

The so-called “charging bowl” is an improvement on existing pads that recharge wireless devices with electromagnetic energy. Devices to not have to be precisely aligned to charge, and Intel is trying to make objects that look less technical, and more like a part of everyday life.

The small computer “card” Mr. Krzanich showed is something Intel hopes independent developers will adopt as a way to make other objects into software-bearing appendages of the network.

The operating system for the cards is Linux, and not the Microsoft product most closely associated with Intel-based PCs. Underlining the way that relationship is now less significant, the Intel boss also talked about supporting, on a single chip, either Microsoft Windows or Android, an open source operating system developed by Google.

Chips like tiny sensors that fit into the earbuds of a runner’s music player, recording the heart rate, are a nice innovation. Mr. Krzanich also talked about working with various fashion companies to make wearable devices that look less geeky than, say, Google Glass (an issue Google has also struggled to address).

By going into so many different things, however, Intel is also entering a world with a much different, and probably more expensive, system of marketing, sales and distribution than in the past.

On the other hand, the past is past. The so-called “Wintel” duopoly is increasingly a relic.

Besides, Mr. Bell noted, “We’d like to own this market, and for every connected device it has to speak to a computer server.” Usually that is a server with an Intel chip. To sell more devices, you need more powerful, and profitable, chips.

“We’re one Intel, Brian has made that clear,” Mr. Bell said.

Intel CEO Seeking to Change ‘Intel Inside’ to Everywhere

Intel Corp. (INTC) Chief Executive Officer Brian Krzanich will take the stage at the International Consumer Electronics Show today with the message that the chipmaker will do what it takes to remain relevant as consumers switch to mobile devices for computing tasks.

Krzanich, who will make a keynote presentation tonight at the 150,000-attendee trade show in Las Vegas, is set to feature a first public showing of some of the mobile and wearable technology from Intel’s New Devices division, led by former Apple Inc. executive Mike Bell, said a person with knowledge of the plans. Krzanich will also emphasize how Intel has accelerated the pace at which it brings new products to market, said the person, who asked not to be identified because the presentation isn’t yet public.

The world’s largest chipmaker, which dominates the market for semiconductors that run traditional computers, is seeking to branch out as consumers increasingly use smartphones and tablets that don’t contain Intel processors. With the personal-computer market forecast to decline for a third consecutive year and Intel failing to win significant market share in phones, Krzanich is working to ensure that the company doesn’t miss new opportunities such as wearable devices and other personal technology.

“PCs are slowing so you have to offset that with something else,” said Patrick Wang, an analyst at Evercore Partners in New York, who has the equivalent of a sell rating on Intel shares. “The biggest challenge is it takes a lot to move the needle at Intel.”

Robert Manetta, a spokesman for Intel, declined to comment.

PC-Dependent

The Santa Clara, California-based company, which Krzanich took over in May, remains heavily dependent on servers and PCs. Intel has more than 80 percent of the market for PC processors and more than 95 percent share in server chips, according to researcher IDC. In November, the company forecast that sales will be about the same as the $52.6 billion it will report for 2013, below the $53.7 billion analysts were projecting, according to the average of estimates compiled by Bloomberg.

Since becoming CEO, Krzanich, a former semiconductor factory manager, has taken steps to diversify Intel’s business. He has said Intel will focus on providing what the market wants in chips rather than following the company’s traditional method of designing and producing products aimed at determining the direction of technology. In addition, the company’s plants, which Intel says are the industry’s most advanced, may produce chips for rivals, he said in November.

Not Insular

“However the market moves, wherever the compute need is, we want our products to do it best,” Krzanich told analysts and investors at a meeting at the company’s headquarters that month. “We’d become insular. We’d become focused on what was our best product rather than where the market was moving.”

The 53-year-old also has said he’s speeding up the time it takes from design to production of new chips and concentrating efforts on lower-power products. Intel has a new processor called Quark, which it’s trying to get into everything from household appliances to industrial equipment.

Krzanich’s openness to producing chips for other companies and to listening to what his customers want is a departure from predecessor Paul Otellini, who had said smartphones and tablets wouldn’t be used as PC replacements, according to Stacy Rasgon, an analyst at Sanford C. Bernstein & Co.

“They had their head in the sand,” said Rasgon, who has the equivalent of a sell rating on Intel shares. “Their push now is to make sure they don’t get blindsided again.”

Hurdles Remain

The CEO, who like his five predecessors was an internal appointment, may need to go further to make what Intel produces central again. While wearable devices could become the next billion-unit market, according to Rasgon, Intel isn’t fast enough at rolling out new products, he said.

Intel shares, which gained 26 percent in 2013, fell less than 1 percent to $25.78 at the close in New York on Jan. 3.

Evercore’s Wang said Intel’s factories might be its best bet for getting into new markets. The company will spend $11 billion this year on plants and equipment to maintain its lead in transistor technology. Intel said it is more than a year ahead of competitors in the manufacturing of the fundamental component of all semiconductors.

To participate in the market for smartwatches, glasses and the so-called Internet of things, where Intel has no track record in designing chips that are any better than alternatives, the company should open its factories to rivals such as Qualcomm Inc. (QCOM), which are more likely to win, said Wang.

That’s a step further than Krzanich may be ready to take and would require the shutdown of some of Intel’s own efforts to get into smartphones and tablets because there’s no point in empowering a competitor to undermine your own research and design efforts, he said.

Any wins with new products for wearables or similar devices won’t have an immediate impact, according to Rasgon.

“It’s not going to be anything meaningful in 2014,” he said.

To contact the reporter on this story: Pui-Wing Tam in San Francisco at ptam13@bloomberg.net