Intel gets it right for once
Gold star for processor launch
Opinion Intel has, quite unusually, got it right for the launch of a new processor family: it has timed the release sufficiently late. Normally, it ruins the PC market's Christmas by making everything obsolete in November; the new Centrino, however, is nicely scheduled. But nonetheless, the market may have hiccups, because of pricing, and channel conflict.
The new machines are officially released today and further models will be unveiled on 1 February. They'll get enthusiastic reviews. But technical reviews aren't the whole story.
The problem comes in two main parcels. First, nobody knows what the effect will be when (if) IBM stops making and selling the ThinkPad brand. And second, there are several people who will be eager to leap into the supposed gap.
Pricing of notebook computers is a black art; at a small pre-launch party in London last night, several of the big Intel customers showed their "Sonoma" based Centrino models. And the wireless technology was about the last subject on the list of any of them.
What they were excited about, was the simplicity of designing new models with specific specs.
"The motherboard, the components, the build, is all designed to make it as easy to produce one special configuration, as it is to build 10,000," said one enthusiastic manufacturer. "It really is possible for a small builder to produce a special design for a run of five machines, and compete with the big guys."
This man's enthusiasm arises because he's one of the players who builds blank boxes for others to re-badge. Without giving the names of the re-badging people (and betraying who he is!) they aren't merely the weird ones; they include some top brands.
One of the players in this market is Asus, whose motherboards are inside a huge variety of notebooks. From what we saw last night, the days when Asus was content to be the invisible partner for a lot of people who hog the limelight, are coming to an end. It was showing Asus-branded systems - we saw three last night, but only because it was a small room that we were in, and the contributors were asked to restrict themselves to two models.
To be honest, Asus was more impressed with its new machines than I was. One was a very cheap machine, obviously designed to look like a Sony Vaiao - small, light, nice design. It included a web-cam, built into the display lid.
Now, the point about a webcam is that you should be able to point it at different things. The Asus design can look towards the user (video phone style) or away from the user, out across the vistas you'd be looking at yourself over the top of the screen.
Which is nice! - only some idiot has mounted the camera on a spring. Which means that it lies flat to the display. Which means that the only way of adjusting the elevation, is to move the display. So, for example, if you're sitting at an airport and want to show what is going on in the lounge, then you have to pull the display vertical. And no, of course nobody can read a notebook screen when it's vertical, as many angry airline passengers have pointed out, vehemently.
Nonetheless, this small flaw apart, the Asus design is incredibly cheap, and if they can smooth the odd error of that sort out of the final product, the range could sell well.
The trouble is, if it does, then Asus is taking the bread out of the mouths of its customers. It's called "channel conflict" and it's something that successful manufacturers have always been utterly aware of; don't sell things to the end-user if you are also trying to sell to the distribution trade.
I have the highest opinion of Asus, both as an enterprising, and as an engineering company. But its understanding of the European retail market is (to quote a large rival's marketing department) "completely ignorant"... "they couldn't find a market with a telescope and a compass." I can't contradict him on that.
What happens in that sort of circumstance is as unpredictable as a flash flood. The bets on "failure, withdrawal" will be popular. Asus doesn't have a huge, well-experienced European HQ staff and so the chances are quite real that its attempt to become a main brand will flop.
The trouble is, this hardly helps. Big, conspicuous flops have notoriously flooded the market with below-cost product, wiping out sales and profits for everybody else. Anybody who remembers Nippon Steel's entry into the notebook business a decade and a half ago will recall the carnage it caused when it launched. But that was nothing to the mess left when it pulled out.
And Asus isn't the only supplier planning big launches.
Low, sleek designs
At HP, they seem reasonably well prepared for any gap in the market which IBM may leave. The new machines (I only saw three) are clearly not HP designs, but Compaq designs - but they are also all re-modelled to look like ThinkPads. Buff black finish, low, sleek designs, and even the famous centrally located inertialess tracker-mouse in the middle of the keyboard, for some models. And a truly lovely docking station which is designed to make it easy to find somewhere to put a full size keyboard, plugged into the back, when docked.
Dell's strategy can't be challenged. Its rivals pour scorn on the Dell build quality, saying that in the corporate market, they have an evil reputation for breaking. Maybe they do, maybe they don't; but the new models had a noticeable enhancement to the thickness of the rubber surround, so maybe Dell have taken action. It hardly matters: Dell has been selling large volumes, and I can't see any reason to predict that this will change this year.
Other brands are equally optimistic - NEC seems to have a beautiful range of truly well-engineered notebooks, for example (I'm busy testing one of its pre-Dothan machines at the moment) and is determined to make the big breakthrough into corporate sales. And the list of other notebook makers, from Elonex to Aopen, includes several who are equally bullish.
One thing is clear: none of these big names is scaling back. On the contrary, they all expect bigger and better demand, and they are getting ready to fill their shelves with products for sale, and the smaller ones are ramping up too.
If someone like Asus or Arrow really can compete on level terms with HP and Dell and Acer, then a lot of this extra production is going to find itself being dumped at cost.
Is this the moment for me to say that I don't actually believe the market predictions for market growth that people are offering for 2005? Because I don't. I think the wireless market did wonders for Intel last year, and the new Dothan-based Sonoma systems which are now going to be Centrino-labelled won't spoil the party. But I also have to query the idea that wireless is going to be all good news this year.
There are several queries. First, is the old one of RF interference. There are too few wireless channels for 802.11b/g technology, and if the market for access points really does take off, the cities will quickly choke themselves. That would take the gloss off notebooks with Wi-Fi in. Will that happen in 2005? or 2006? I don't know, but I'd be nervous about betting on it.
There's also the question of "other devices." At the moment, the PC is the only e-book reader worth looking at, and it's also what most people feel they need to have to keep in touch with head office. But is 2005 the year of the smartphone in corporates? Several people are betting it will be - and that you will be able to manage your corporate data when on the run, through the small screen.
It takes only a very, very small increase in the phone market, to make sales of PCs look trivial. If the market for smartphones doubles, will those users buy notebooks as well? - if not, it could have a nasty impact on mobile PC sales. Again, this may turn out to be a 2006 phenomenon. But is that certain?
Meanwhile, prices of notebooks are set to tumble. A "plain" vanilla empty box, requiring just processor and disk to be added, can be bought wholesale - and in small numbers - for well under £300 sterling, or close to $600 - except that in the US, the price will be well under $500.That will have 256 meg RAM and a 12-inch display. Top of the range, wide-screen models with the full Sonoma chipset, will retail at £1,200 to £1,400 in the UK.
Scarily, most of the price differential is the processor: you'd expect to fork out (wholesale) around the fifty pound mark for a basic Celeron M mobile processor (bottom of the heap!) but the fastest Dothan Pentium M at 2 GHZ will be nearly ten times that, close to £400.
Add a hard disk: an 80 Gig fast drive is now well under a hundred pounds; you can spend forty quid and get a 30 Gig slow one. Another 256 meg of ram is another forty quid. A full optical DVD re-writer drive is still going to add comfortably less than fifty quid to the bill of materials.
If the builders are right, and literally anybody can put together a machine to whatever spec the customer wants, in their back kitchen if necessary, then it's going to be fascinating to see whether the big brands can manage to compete.
All they have, after all, is brand recognition. That doesn't come cheap; and it's easily spoiled. Many people think that taking the "IBM" letters off the "ThinkPad" brand won't make a difference, but are they right? many others think this is their big opportunity. From Intel's point of view, this won't be too much of a concern. The company may be suffering from the (predictable, and predicted) consequences of bad decisions in the server market. There, AMD's 64-bit Opteron chip is wiping the floor with Intel, and Intel's marketing guys know it, even if they can't admit this in public.
But AMD has nothing to come close to Intel in mobile. So if the market for notebooks grows, Intel looks to be the main beneficiary. And if there is chaos, it will be AMD which gets squeezed at the exit.
At the end of 2005, then, I expect Intel's mobile profits to be handsome. But I rather doubt that all of its customers will be quite so pleased.