Business Today

Bucking the downturn

Microprocessor giant Intel appears well positioned to weather the global economic slowdown.

T.V. Mahalingam        Print Edition: November 16, 2008

Intel has got a lot to be smug about despite a challenging business environment. Third quarterly revenues were a record $10.2 billion (Rs 49,980 crore). Atom chips and chipsets— which are targeted at low-end PCs and cheaper Internet access devices (called Netbooks)— alone clocked over $200 million (Rs 980 crore) in sales. Dunnington, the company’s six core processor developed and built entirely in India, was launched a quarter ahead of schedule. But the company is anything but complacent.

Pat Gelsinger Senior VP and GM, Intel
Pat Gelsinger
After all, there is the global recession to contend with, that has particularly hit financial services, which roughly account for over 15 per cent of Intel’s server business revenues, hard. Slowdowns are known to severely impact IT budgets, including server and PC sales, but Intel’s executives are not losing any sleep yet. Pat Gelsinger, Senior VP and General Manager of Intel’s Digital Enterprise Group and one of its top executives, is still wearing a smile, albeit a “cautious one”.

Gelsinger views the scenario from three standpoints. One, how Intel as a company is positioned. Two, customer alignment and finally, the market environment. “Our cash position is good, we have great products, which are gaining market share (in fact, Intel is struggling to meet Atom’s demand). Over the years, we have restructured the company… we are a leaner and fitter outfit as compared to a few years ago,” he says. On the customer front, Gelsinger says, the company is well aligned with their customer’s roadmaps and rollouts of products. It’s the third factor that is making Intel and Gelsinger cautious. “Till a couple of weeks ago, things looked fine on both the enterprise and customer segments. But towards the end of the last quarter, the demand softened a bit. The market environment is uncertain,” says Gelsinger. As a result, Intel has decided to publish a midquarter update for investors on December 4.

Having said that, Intel has a lot to smile about, including its operations in India. It started chip design in India almost six years ago and recently reached a major milestone when the company launched its highend server microprocessor, Dunnington.

The company’s Atom chip may also change the nature of the game for Intel globally. Designed for low-end Internet access devices like Netbooks and Nettops, the chip may be a clear winner for Intel, especially in developing markets which are pricesensitive. “We are going to push a particular Intel architecture— the Intel x86—and stretch it from the high-end devices like servers (Dunnington is a step in that direction) to low-end machines like Nettops,” says Gelsinger. The going, though, will not be easy as Intel will enter into a space dominated by players like ARM, Texas Instruments. “That means we are looking at new price points, focus on small form factors and make significant efforts towards System on Chip (SoC) development. That’s a new set of muscles we need to develop.”

Ask the man who has worked on the 80286, 80386, 80486 microprocessors if the desktop or PC is dying and pat comes the answer. “Volumes are increasing globally, revenues are increasing, margins are good. If these are dead businesses, I really like dead businesses,” says Gelsinger.

Intel blueprint for growth
Target 4th quarter sales in the range of $10.1 bn and $10.9 bn
• Enter new segments with its Atom microprocessor and chipsets
• Look at further penetrating developing markets

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