Friday, June 15, 2007

Intel the one trick pony

Normally I think about the battle for total world domination as Microsoft vs. Google. An occasional wise guy might suggest Apple, Nokia or Yahoo, but they are definitely 2nd-tier contenders.

The end of the tech bubble made it easier to forget about the other half of the Wintel duoopoly. Yes, Intel’s stock has been falling over the past three years, but they’re still a $40 billion/year company with at net profit margin in excess of 20%.

Somehow I’d missed Intel’s declaration of war against ARM and its chokehold on the mobile phone processor market. Once upon a time, they were going to work with ARM via their XScale processor, but they dumped that off almost a year ago to Marvel, a SV startup that hopes to succeed where Intel failed.

In April in China, they unveiled the Linux-based “Mobile Internet Device,” in some ways an extension to their Ultramobile PC and in other ways a knock-off (as well as building upon) Nokia’s open source work in its 770 and N800 tablets. (If you’ve been living under a rock, these are non-GSM WiFi devices). The Intel products (to be made by various ODMs — see also the Japanese report) are due early next year.

There’s no way for Intel to succeed without besting ARM, who (according to a May shareholder presentation) have better than an 80% market share for its architecture. Intel has the sole PC architecture (since Apple switched) and the vast majority of chip sales in that architecture, and of course the 25+ year old ecosystem that goes with the x86. So this is really a war not only between two companies, and two architectures, but two ecosystems: given Intel’s resources, it at best will be a WWE-style SmackDown, and at worst, a fight to the death.

This harkens back to Intel’s decision in the 1980s to kill its RISC architecture, the iAPX 432. There are two ways to interpret this.

On the one hand, as Andy Grove recounted in his 1996 book Only the Paranoid Survive, Intel’s support for the i432 was diverting resources and sending a mixed message to the market. Instead, Intel put all its market and R&D power behind the x86, and they did pretty well by that until the bubble burst.

On the other hand, Intel is out of DRAMs and probably going to bail out of flash memory too. It tried motherboards and gave up. Its other comm chips went to Marvel. In short, it’s failed at everything other than follow-ons to the 8086. So in the 29 years since the x86 was born, it hasn’t really created any new lines of business. Apple went from Apple II to Mac to iPod (and maybe even iPhone). Microsoft went from Basic interpreters to operating systems to business productivity to server software — and created a whole new videogame platform while it was at it. IBM of course has the broadest revenue stream of anyone.

Oracle is a one trick pony, and Larry Ellison is still worth billions. WordPerfect and Lotus were one trick ponies (OK, Lotus came up with a 2nd trick) and they’re gone, just as Novell is in the process of disappearing. Intel is a lot bigger than those companies, but right now it seems to be saying that its growth will come from repackaging the same old same old, rather than creating some new product family or market.

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