Competitive Intelligence

Intel Reorgs Itself... Again!

Intel's reorganization follows a year-long trending away from processors and toward solutions and, on Monday, Intel announced that it was reorganizing the company into five business units that will target platforms rather than silicon. It was a move away from the traditional two business units it had been operating with - the Intel Architecture Group, which handled the bulk of the company's processors, including Pentiums and Xeons, and the Intel Communications Group.

The reorganization continues Intel's evolution beyond processors and chip speed. The company started moving away from chip frequency last year kicking off a new processor-naming scheme to de-emphasized gigahertz.

The new business units will include the Mobility Group, led by Sean Maloney and Dadi Perlmutter to focus on mobile devices, notebook computers cell phones and handhelds. In was in the area of mobile computing that Intel in 2003 made its first step toward becoming more platform-focused, with the launch of Centrino. The mobile platform not only offered a processor, but also a chip set and wireless access component designed to work best together.

Two other units include the Digital Enterprise Group, led by Pat Gelsinger and Abhi Talwalkar, and Digital Home Group, headed by Don MacDonald. Like the mobility unit, these groups will focus on creating complete computing and communication platforms for businesses and homes. The final two units are the Digital Health Group, led by Louis Burns, and the Channel Products Group, headed by Bill Siu.

eWeek's Dave Coursey was skeptical:

As many times as Intel has reorganized lately—four times since 1997 according to published accounts—I have to wonder whether it really matters how the company is structured. About the time the old order is out and the new order is in the new order becomes the old order and the process starts anew.

This year's model is an Intel based around market opportunities rather than technologies, which is about as clear an admission as you're going to get that we have plenty of technology running around but not enough interesting uses for it.

This reorganization is supposed to better connect Intel with the marketplace. The goal is finding new uses for as many MIPS as possible. The perfect innovation, from Intel's perspective, is something that causes customers to buy lots of new processors, either as upgrades or in completely new types of devices. But Intel is also extending its silicon offerings to include features not directly related to the CPU, such as wireless technology.

Touted as an example of Intel "done right" is the supposed "success" of the Centrino mobile processor set, a new version of which has just been introduced. I have not looked at the numbers, but it's hard for me to get excited over Centrino, best-known for forcing 802.11b wireless on customers just as 802.11g became affordable.

In my view, if Centrino really had been successful, customers would have dumped their old notebooks just to get a new Centrino-based machine. I haven't seen a lot of that happening.

If Centrino kept hardware OEM's buying Intel instead of AMD that alone would make it a success by some measures. But that doesn't fulfill the mission of convincing customers to buy new CPU's they wouldn't have bought anyway.

The reorg is a tacit admission that Intel is going to have to do more product R&D if chip demand is to increase. I am talking about real products, such as home entertainment or medical devices that could be built around specialized Intel chip sets. Already Intel has been shifting its focus away from the "speeds and feeds" of old toward feature sets enabled by additional Intel silicon.

The company has been doing this sort of work almost forever, but its latest output has been kind of depressing. Think Media Center PC's and iPod-ish video players as examples of Intel innovation. And Centrino, of course.

None have ignited a marketplace sensation. The next opportunity seems to be 64-bit processing, though it's barely on most customers' radar. The challenge of getting customers to shorten their PC and server replacement cycles has gone unmet.

This problem isn't Intel's alone. Microsoft, as I've commented before, faces the same issue: There's no shortage of better ways to do things, but getting from here to there presents a tremendous challenge. Especially while maintaining significant backward compatibility and reducing risk to acceptable levels.

But, only five months until Paul Otellini takes over as CEO for a retiring Craig Barrett, Intel still faces the same challenge as before - coordinating the work of different business units so that it can deliver products that work well. Organizing businesses with the end market in mind, as opposed to distribution along product lines, is a generally good idea of modern management... especially for huge companies. However, it will be a while before the company can start reaping any benefits in terms of sales, although the move should also make it easier to spin off maturing business units.

This is a prelude of things to come as the Otellini era of Intel's management takes over where Barrett, and Grove before him, left off.

- Arik