5.03.2007

Intel Business to Get Better

From the Wall Street Journal:
"According to Mr. Otellini, while Intel expects to have revenue growth in 2007 and 2008, he expects the bottom line to grow faster than the top line."

This doesn't bode very well with Sharikou's Q2'08 Intel Bankruptcy.

$5 Billion savings in 2 years is quite an accomplishment for an already lean company such as Intel. One big question that needs to be answered is whether the $3B savings next year involves selling Intel's flash business. Otellini may be in for a big fight with the Intel's "grey men" which includes the company founders, Andy Grove and Gordon Moore. If you know anything about the history of the semiconductor and integrated circuits you would realise how Intel holds the Flash business close to its heart. For the old Intel, there is just too much history and pride involved with the money losing division. But then again, Otellini runs the show while Grove, Moore and Barrett knows exactly change is necessary.

For AMD, this is another $5B that Intel can throw just to keep competition at bay. Not good.

5 comments:

Anonymous said...

Not good at all.

Anonymous said...

I don't think Intel will sell-off the NOR flash division within the next 2-5 years.

I'm not sure if this is public knowledge but the NOR FLASH group is now a separate business group within Intel (happened about 1 year ago) - having its own development methodology and tools. Previously the NOR guys were bleeding because they were running on a common development methodology used in processor/chipset. The methodology is great when you're working with highly complex stuff w/ good margins but in FLASH speed to market and cost-effectiveness is the name of the game as the product name itself implies.

E.g. Samsung can develop and certify a new FLASH chip in 2 weeks. Intel needed a minimum of 4-6 weeks using the old methodology.

So basically Paul O. moved them out so they have the freedom to use a different methodology that suits their business. @Intel everything is standardized as much as possible worldwide - from the development methodology to the cubicle size to even the trash cans - courtesy of the Copy Exactly! strategy. Paul O. is giving them a couple of years to work out the system and prove themselves before he decides whether or not to kill NOR. In the meantime the other business groups' profits can sustain the NOR guys' losses.

For NAND Intel has entered a joint-venture with Micron (IM Devices) with a fab in Singapore - not sure if this fab is already operational. I guess Intel wants to leverage Micron's experience in memory - something that was unthinkable in the Grove-Barrett years.

Anonymous said...

"$5 Billion savings in 2 years is quite an accomplishment for an already lean company such as Intel"

While $5Bil is quite impressive, I would not call Intel "lean". This is a company that went through dramatic headcount increases over the last 5-10 years and if you look at revenue/employee or earnings/employee you'll see Intel was getting anything but lean...

I think they will keep NOR - there are strategic reasons to have this capability and I still believe Intel considers Samsung it's biggest threat - while this doesn't necessarily mean NOR, you can see the joint venture in NAND with Micron and Intel having a diversified memory capability (in addition to CPU's) is important in this regard. If they really had wanted to divest from memory completely they would have doen this at a similar time that AMD did.

Also I'm not sure if the $3 Bil next year includes ~2Bil from the lowered headcount (with the addition 1Bil to be found elsewhere). I seem to recall reading this somewhere but can't find the link.

Roborat, Ph. D. said...

While $5Bil is quite impressive, I would not call Intel "lean". This is a company that went through dramatic headcount increases over the last 5-10 years and if you look at revenue/employee or earnings/employee you'll see Intel was getting anything but lean...

intel makes more today than it did in the past while revenue remained flat.

Anonymous said...

"intel makes more today than it did in the past while revenue remained flat."

OK, semantics - they couldn't do this (earn more money with revenue flat) if they were starting from a point where they were less then lean.

Also if you look at industry benchmarks regarding labor (technician/output, service tech/tool ratios, etc), there is still some fat left (less than before but not zero)