TECHNOLOGY SPECTATOR: A defining disruption at Intel

The sudden departure of CEO Paul Ottelini could prove to be a blessing in disguise for Intel, giving it a chance to change direction in a mobile-centric landscape.

Technology Spectator

Intel’s fortunes have always been closely aligned to Microsoft’s. So much so that their respective stock prices have largely moved in lock-step over the past 25 years.

Both companies have realised, possibly too late, that the world has moved on from the desktop and both are desperately trying to make up lost ground with products aimed at the mobile market.




The potential difference for Intel over Microsoft is the opportunity to change direction after the resignation of chief executive Paul Otellini. Otellini was instrumental in moving Intel to value efficiency in its microprocessors over raw power. However, he still fundamentally believed that the PC’s dominance had not ended saying in an interview "I don't think there is a tablet- or phone-centric world.”

Unfortunately for Otellini, Intel’s third quarter’s financial results reflected the downturn in the PC market with net income down 14.3 per cent on the previous year. The six per cent increase in its data centre group didn’t make up for this shortfall as this only accounts for about 25 per cent of revenue.

Despite Intel’s hedging on the mobile world, in 2010, Otellini hired ex-Apple engineer Mike Bell to head its mobile chip efforts which not only resulted in the ‘Medfield’ chip but two phones built by Intel, the Xolo X900 and the Orange San Diego. Joining Medfield is ‘Clover Trail’, Intel’s CPU platform for Windows 8 tablets. Given that Windows 8 sales have been off to a slow start, Intel is unlikely to see sales of the Clover Trail really take off in the short term.

Intel is still capable of innovating and has an advantage over rivals in that it handles everything from the design to the fabrication of its processors. This will become important as more capabilities are built into not only the CPU but the system on a chip. That includes the capability of handling video and imaging, encryption which they do now, to supporting a range of other functions including handling communication and sensors all whilst using less power and space.

Mobile urgency

The urgency of Intel’s moves into the mobile space may become more acute with Apple apparently discussing the option of moving its laptops and PCs to ARM processors, the same processors it uses in the iPad and iPhone. Even though Apple only has around 10 per cent of the PC market, the impact on Intel would be noticeable. What would make it potentially devastating however is if Microsoft followed suit. Microsoft has already brought out versions of Windows 8 for ARM and Intel. Unfortunately, this has resulted in some confusion for customers in that the two versions are not compatible. With some effort however, Microsoft could make compatibility less of an issue by providing support for running Intel applications on ARM machines. Apple has done this successfully in the past when moving from the PowerPC to Intel.

In Apple’s case, it is trying to reduce its reliance on any external parties and is providing the design of new features for the chips it uses in its devices. Having more control over the processors that run its laptops would mean more of the profit would go to Apple.

Intel is considering looking for a chief executive from outside the company but analysts consider this unlikely and see the company changing little as a result of its next appointment. They cite the risks involved if any change to the company doesn’t work. Certainly this would be true in the short term, but standing still doesn’t seem to be much of an option for Intel either.

David Glance is a director at the Centre for Software Practice at The University of Western Australia.

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