Biz Briefs: A New Brain For Intel

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Otellini (who once remarked that "a waking hour is a working hour") has wasted no time putting that political capital to work, announcing a wholesale reorganization of the company--splitting it into five groups with such names as "mobility" and "digital home," each of which will focus on different ways consumers use technology. Yet analysts have not stopped being skittish about the company's future. "They need to get their road map stabilized," says Kevin Krewell, editor in chief of Microprocessor Report,a trade magazine. "People in the industry count on Intel to know where it's going. If it swings wildly around, the market gets nervous."

For one thing, Otellini's "platformization" still has to prove itself in areas other than Centrino. Later this year Intel will announce an as-yet-unbranded platform for desktop computers (dubbed Desktrino by company insiders) that takes advantage of Intel's dual-core technology. Dual-core puts two brains on the same chip, which makes it easier to run multiple applications at the same time. But Desktrino may be outmoded before it is born. IBM, Sony and Toshiba took a surprise lead recently when they announced production of their Cell processor, which has eight brains to Desktrino's two.

Intel watchers are also nervous about how much the company is dependent on the rapidly maturing computer market. "They have to look beyond the PC," says Apjit Walia, an analyst with RBC Capital Markets, who points out that Intel has fallen far behind its rivals in putting chips in cell phones and other wireless devices. "They have been talking the talk in communications; they haven't walked the walk." Indeed, Intel's communications division is still losing money, despite a $10 billion investment since 2001. Barrett and Otellini say the division is a work in progress.

Doomsday predictions, of course, have surrounded Intel for years: that the PC market is maturing, that the competition is cutting into Intel's lead. Yet the company has managed to keep growing. Despite AMD's recent resurgence, Intel's position in the PC-chip business remains unchallenged, with a market share of nearly 90%. It is also a step ahead thanks to Barrett's farsighted investments in manufacturing. While AMD has one major semiconductor plant, Intel has four placed strategically around the world, churning out chips 24 hours a day. And unlike PC manufacturers and retailers, who have to deal with wafer-thin margins, Intel--thanks to its dominant position--enjoys a 55% profit margin on every $300 PC chip. "Most companies would kill to get margins like that," says Nathan Brockwood, senior analyst for Insight 64, a Silicon Valley research firm.