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Intel Mobile Strategy A Winning Combination

Late last year Intel wisely shuffled its organizational structure to create five business units, two of which are now the primary centers for most of the company’s ongoing processor efforts. Those new divisions include the digital enterprise group, which controls Intel’s PC and server processors, and the mobile platforms group, which includes processors used in notebook computers, cellphones and PDAs, as well as flash memory. The change broke-up products that had been under the communications banner into multiple divisions, and ties the future fortunes of its cellphone effort in with its rapidly expanding notebook computer business.

That’s also where the technology and marketing is helping to create what is now the company’s most rapidly growing processor division. Intel hit a home run with its mobile platform Centrino over the past few years when at times it seemed the company was stuck in a mud hole of manufacturing setbacks and shifting strategies inside the rest of the company. But the company’s decision to push ahead full-steam to tie 802.11-based wireless LAN technology to its Pentium M processor-based notebook platform even before it had its own product to ship turned golden. Under an avalanche of marketing and advertising that only Intel or Microsoft could hope to command, Intel was able to communicate the message that the time had come for mobile computing, and that Centrino was the answer. It meant little to most end users, either in corporate accounts or consumers that Intel was using a third-party WiFi chip in the early platform, which it later was able to replace with its technology. Intel has now indicated that it will likely begin to integrate WiMAX within its mobile platform as early as next year, despite potential disruption it would cause to the now established WiFi market.

Revenue for Intel from processors in the notebook market grew to nearly $2 billion in the first quarter of 2005, up from about $1.2 billion in the first quarter of 2004, which came at the same time that revenue for processors to desktop PCs and servers showed little or no growth. Into that expanding segment, Intel has thrown its struggling cellphone effort. The sins of the cellphone initiative are less noticeable under the gloss of the notebook revenue. In addition, Intel asserts that it is finally on the verge of a break through after an investment of billions in the cellphone market.

In the past Intel has declined to be specific about the number of shipments of its X-Scale-based processor targeted at the cellphone market. The processor has done well in the small PDA market, but seen little traction in the huge cellphone market. Sean Maloney, executive VP and general manager of the mobile platforms group for Intel, however, says that the company will ship about 30 million processors to the cellphone market this year. That’s still small compared to the total 680 million cellphones shipped in 2004, but at least Intel is talking tangible numbers now.

While Intel can paper-over any perceived wounds with cash, it has suffered at least in perception in the processor market the past two years while the nimble Advanced Micro Devices has made headlines with its extension of the x86 processor market to 64-bit instruction sets, introduction of the first dual-core processors for the server market, and most recently, impressive benchmarks for its dual-core PC processor. In the mobile market, Intel continues to rule the roost, both in terms of revenue and public perception. Earlier this year AMD introduced its first mobile processor with 64-bit instructions, the Turion 64. Ask anyone on the street if they would prefer to have a Turion or Centrino under the hood of their notebook computer. Intel has already generated more than $5 billion in revenue off Centrino in the past two years, a run-away freight train of technology and marketing that may be impossible to slow down.

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