Intel fouls up two years in a row

Hunting of Snark begins

Analysis Intel must be quite eager to put the 20th Century behind it, given that this is the second calendar year in a row that it has a) suffered the slings and arrows of outrageous fortune or b) fouled up on its strategy, that answer depending on whether you believe in kismet or kiss-ass.

At the end of last year, we reported on Intel's annus horribilis, and wondered if things could possibly get any worse for the semiconductor giant, pointing out that it had a slender window of opportunity to prevent competition from shape shifters AMD and Via nibbling away at its big cake and slowing down its gravy train.

The year 2000 began with Intel beginning to distance itself from a small Mountain View company called Rambus, prepare the ground for the introduction of the Pentium 4, get its .18 micron factories up to speed on Pentium III production, use its tried and tested pricing methods to leverage all of the above, get its chipsets working, introduce the Itanic 64-bit microprocessor, sell more of its IXA mycelium infrastructure to big telecoms, make investments in up-and-coming firms and reap the benefit of those capital investments, etc. etc.

Unfortunately, the best laid plans of mice, men and Craig Barrett aft gang agly.

Last week we saw Intel admit, for the second quarter in a row, that its profits were unlikely to sparkle. The corporation warned that even its Capital wing would be unable to bolster its bottom line, due to the combination of the Moon with Uranus in the 12th house. (We made the last bit up).

How could once mighty Chipzilla suffer such an attack of the wobblies?

Many of the answers, in fact, can be laid at the door of Intel's failure to execute on its Pentium III strategy. The day after Intel introduced (launched) its Coppermine family to an agog world, we reported that behind the scenes it had issued e-missives to manufacturers and distributors warning of shortages across the entire range ranging from three months to six months.

The Intel PR engine went into OverDrive™ and for much of the first six months of 2000, it seemed that the suits in Wall Street were in denial, their eyes, ears and intuition telling them one truth, while the great god Cognitive Dissonance prevented their mouths speaking that truth.

Intel even started shipping defunct Pentium IIs to their biggest European distributor in February, an act that threw that firm into the arms of AMD.

The Intel mantra continues to be that weakness in the Euro and poor demand from PC manufacturers have impacted their business, even though poor supply from Chipzilla has allowed upstarts AMD and Via to profit from the ill-wind blowing from Santa Clara. Both AMD and Via have done all right because Intel's strategy has wavered.

Insiders at Intel tell us that many of the ails stem from the time when Dr Andrew Grove stepped down from day-to-day control of the corporation. His successor in that job, Dr Craig Barrett, appears to have initiated a fresh style of management, with many of the decisions devolving on the middle tier of suits.

These, suffering from the famous confrontational style of the corp, told their bosses that everything was hunky-dory, ignoring the message from the miners in the sand pits that things were far from funky.

Shareholders must now be wondering aloud about how they could see INTC stock plunge from this time last year to $34 at close last Friday. And they must also be summoning up the nerve to start contemplating, at least, a change of scene at the head of the corporation.

They will also contemplate the fact that their return on investment on INTC stock has been over 300 per cent over the last five years, and wonder whether that ramp - fuelled as it was by microprocessors - can carry on running.

Can the Pentium 4 turn round Intel's fortunes? Not right now it can't, no. And don't forget that Intel hasn't yet completed its move to .18 micron technology, never mind the .13 micron it promises for next year. That means more engineering madness in the sand pits, folks.

Meanwhile, top dude Craig Barrett must now be wondering about whether he is the Snark, and telling the same story three times will save him or sink him. ®

Related Stories

Intel slide a little wafer thin
Intel is an absolutely fab company
We forgot some Intel blunders
1999: Annus horribilis for Intel

Sponsored: Minds Mastering Machines - Call for papers now open

Biting the hand that feeds IT © 1998–2018