Opinion: There's plenty of good news coming out of the Intel Developer Forum, but system vendors and partners may be listening to Intel with one ear and AMD with the other.
When Intel CEO Paul Otellini took the stage to open the annual Intel Developer Forum
on Sept. 26, he ran down an impressive list of technical achievements the company has made over the past year and its expectations for the next few years. But the backdrop for this years keynote must be the continuing inclination of partners and ISVs to show their independence.
In his keynote address in San Francisco, Otellini pitched OEM customers on forthcoming quad-core processors, energy-saving technology and the advantages that will come with Intels transition to 45nm manufacturing process. Due sometime in 2007, the new, smaller chips will deliver a 20 percent performance boost, he said.
The good news for Intel and its partners is that the company is back on track, delivering products on time or even ahead of schedule.
But what wasnt a part of Intels message? The downbeat news, of course. Here are some points that must disturb the serenity in the upper management suites:
Downsizing. Intel earlier in September said it will cut about 10 percent of its work force by the middle of next year, with some 7,000 positions ending this year. That means a lot of pink slips in the next quarter. Happy holidays, everyone.
This "restructuring" will continue into 2007 and is expected to save Intel some $2 billion next year and $3 billion in 2008. However, depending on how the economy and tech market fare, we could see more cuts in the future.
Antitrust actions. According to reports on Sept. 27, parts of the antitrust case brought by Advanced Micro Devices were tossed out by the U.S. District Court in Delaware. However, the case may proceed, depending on rulings perhaps later the week of Sept. 25. Now, its been so long since we heard about this case, wed almost forgotten it.
Filed in June 2005, AMDs action says Intel unfairly used its dominant market positionhere in the form of product rebates and marketing fundsto influence PC makers to limit purchases of AMD chips. The effect of this action is to limit choice for consumers.
Meanwhile, recent online reports mention that a German investigation of Intels competitive practices was passed on to the European Commission Competition regulatory body. A spokesperson said the probe would continue, despite the upward move of AMD market share, the report said.
Market share creep. With recent quarterly earnings reports, AMD saw its market share move up a tiny bit, from 21.1 to 21.6 percent for the first quarter of 2006, analysts said.
At the same time, Intel moved down a couple of percentage points to 72.9 percent, from 74.3 percent.
AMDs figure doesnt sound so impressiveafter all, Intel has a huge advantage in share.
Yet each incremental shift moves AMD further into "magical" territory, as least as far as some in the computer industry are concerned. For some reason, 20 percent is considered a golden number.
This metric was explained to me a decade or so ago, during a meeting with Frank Huang, then chairman of Umax Data Systems, in Taipei. His company had big plans for PowerPC-based Mac clones in Asia and in the United States.
According to Huang, a platform needs a base of 20 percent to create a vibrant and sustainable market. With this level of interest, a computing platform can support a range of parts suppliers and provide both competition and growth for its participants.
(As we remember, Apple Computer pulled the plug on its Mac clone experiment in 1997. Umax, which was also a maker of scanners, left its system dreams behind and changed its name in 2001 to Veutron.)
As AMD continues to keep its share in the golden 20 percent range, system vendors and other suppliers have more confidence in the company. This also provides vendors with leverage when negotiating with Intel.
Notice Intels recent use of the word "persistent" around its platforms? This word sounds like something that would come from an insurance company rather than a semiconductor maker. We will be there for you, Intel is saying.
However, this language is also a dig at AMD. Intel is telling system vendors that with a 70-something market share and stacks of road maps, it can count on leveraging platform engineering for a good while. And it asks, Is the same true for AMD?
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Yet, Intel isnt a chip maker, its a platform company. With current capital expenditures running in the billions and its touted 45nm manufacturing processes costing the company between $9 billion and $10 billion, Intel is on a serious mission to capture and hold onto customers.
Even users are a significant part of this platform strategy, as Intel seeks to brand its platforms with end users. The branding is moving beyond the Intel name and the specific processor towards the platform chip set. Intel is slicing up the market, creating different platforms for various market segments.
But resistance to Intels strategy may be growing, according to analysts.
In a panel discussion at the Diskcon USA storage conference earlier in September, Harry Blount, IT hardware and storage networking analyst at Lehman Brothers, of New York, said major system vendors were not blindly accepting Intels platform initiatives.
According to Blount, a "well-placed" contact at Hewlett-Packard said the company would pass on Intels Robson flash-based chip set. The issue wasnt technological: HP refused to get "locked in" to such an architecture, he said.
HP declined to comment.
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Intel may be back, as its executives claim. But this time, it appears that partners and customers may be looking at both the large and fine print on the road maps.
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