Why mighty Intel strikes out
Published: 12 Oct 2000 09:39 BST
THREE STRIKES
Intel was plagued by problems on three major fronts this year:
Strike One: Changing Markets
Intel's September 21 profit warning sent its stock reeling, losing 40% of its value. Intel blamed the weak Euro. But the PC market is changing.
Growth in PC revenues is projected to slow from 17% this year to 12% in 2001. Fewer PCs means fewer chips.
And as BusinessWeek says, Intel is still dependent on microprocessors. Whereas specialty parts makers for networking and communications gear will be the big winners.
Strike Two: Competition
AMD kept pressure on Intel, matching chip speed at every turn. AMD releases its 1.2 GHz Athlon this month, and says it will ship faster Athlons roughly every five to six weeks. And unlike Intel, AMD beat analysts' expectations again this quarter, earning 64 cents a shares, something that was unheard of just a few years ago.
Upstart Transmeta is poised to make a big debut in the notebook and mobile devices space. Sony, IBM and Hitachi have all partnered with the startup to create notebooks and Web pads using Transmeta technology. And Transmeta's upcoming IPO will bolster its coffers.
Strike Three: Product Problems
Increased competition has forced Intel to rush products to market, and it shows.
Intel delayed the launch of its Pentium 4 because of a Rambus chip set glitch. It recalled its 1.13 GHz Pentium III after a glitch caused certain programs to freeze. Intel then announced it won't ship the fixed versions of the chip until next year.
The company miscalculated demand for high-end Pentium III chips when it switched to a .18 micron process, causing a shortage.
And Intel killed its problem-filled, low-end Timna processor.
"SAY IT AIN'T SO"
Despite the strikes, Intel isn't out. Far from it. Its factories are operating at near 100% capacity. And the Semiconductor Industry Association says industry revenues will grow 25% to $244 billion.
And Intel is the number one worldwide semiconductor vendor by revenue, according to the Gartner Group.
Just don't look for Intel to have a championship season next year either. A year of steady growth for Intel translates into a disappointing year for investors.
Like all champions, Intel is just in the throes of an off year. But like any hall-of-famer, they'll have to adjust to a changing game filled with eager young players in order to stay on top.
Do you think Intel's off its game? Hit the Talk Back button and give me your play-by-play.
To have your say online click on TalkBack and go to the ZDNet forums.
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