Tuesday, February 5, 2013

Intel outside, Qualcomm Inside!

Suddenly, a half-sized enemy known as Qualcomm, has stepped into the ring as a challenger to Intel’s heavyweight tech-title. How many rounds will this bout last? B&E’s Steven Philip Warner answers

One fine October afternoon, Andy Grove, the legendary former CEO of Intel, stepped up to the microphone in a five-star hotel ballroom down the street from Intel’s Santa Clara headquarters, to address about 300 top managers from the world of technology and media. Just two minutes back, Intel’s CMO Eric Kim had outlined how Intel must “clear out the cobwebs” and put to rest many Grove-era philosophies! A deafening silence followed. For Grove, it meant giving his sanctified official approbation in his Hungarian-accent, to Otellini’s plans of jettisoning the old Grove formula of remaining cock-eyed on microprocessors for PCs, thereby pushing ahead Intel into more than half-a dozen segments, including wireless technology. And he did just that, that fine October afternoon of 2005, a day in the life of Intel, which was supposed to change its future forever... which it has, at least till date!

In the four years that have followed, Intel has not been able to return revenues higher than the $38.83 billion it had recorded in FY 2005! To imagine that this followed a consistent 13% y-o-y increase in annual revenues till 2005 isn’t quite the painful ordeal, for here comes the bombshell – when Grove relinquished his CEO title in May 1998, he had presided over a 4,825% growth in Intel’s Mcap (that touched $197 billion). But since Otellini took charge in May 2005, the company has shed 30% of its value (that fell to $107 billion as on January 31, 2010). Clearly, Otellini, despite his ‘timely’ move into mobile devices, failed to factor-in threats from worthy opponents, who have over time, chiselled away Intel’s market dominance. And the most dangerous amongst the challengers is the $66 billion Qualcomm, as Tom Halfhill, Senior Analyst, In-Stat Reed Business Information US tells B&E, “Qualcomm’s strength is low-power ARM-based system-on-chips. It will take a while for Intel to match its top rival’s low-power & high-scale of integration.”


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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