USAToday Column

August 15, 2016
Intel's battle for relevance

By Bob O'Donnell

FOSTER CITY, Calif.— It’s an interesting situation. The company that arguably started and dominated the intelligent devices market for decades now finds itself in the role of an underdog, just as we’re entering an era when the number of smart, computing-capable, connected things is exploding all around us.

But that’s exactly the position that Silicon Valley stalwart Intel finds itself in on the eve of its big annual Intel Developer Forum (IDF), being held in San Francisco this week.

Intel’s long-term strength, of course, has been providing the vast majority of the computing brains (the CPU) for the PC market. After several years of declining PC shipments, however, that legacy advantage has turned into a disadvantage, even despite signs that commercial PC shipments could be on the rebound.

Earlier in the year the company announced large layoffs and an intentional focus away from PCs, which still made up about 55% of the company’s revenues in its last quarterly earnings.

One of the biggest issues is that the company infamously missed the mobile market opportunity, particularly with smartphones. For literally billions of people around the world, smartphones have become their primary computing device, and Intel has had little impact there to date, even despite purchasing cellular radio manufacturer Infineon back in 2011.

Now, however, there are increasing signs that smartphone shipments have also started to peak — ironically, just as rumors are increasing that Intel may have won at least some of the cellular radio business in Apple’s next iPhone — so the race is on to discover the next big tech opportunity.

The problem for Intel, and many other tech companies, is that there is no obvious choice as to what that “next big thing” will be. Instead, it’s becoming increasingly clear that there’s going to be a highly splintered range of many different, but generally much smaller opportunities in tech.

In that context, Intel is expected to highlight its progress on a range of new initiatives at IDF this week, notably 5G, deep learning and cloud computing, several of which can take advantage of major purchases the company has made fairly recently.

In the case of 5G, Intel is hoping to leverage not only their growing strength around cellular modems, but even more importantly, the move to software-defined network infrastructure. Major telecom carriers, such as AT&T, are aggressively working towards updating much of their core equipment as they migrate towards the new wireless standard, and that creates an opportunity for Intel-powered open hardware to replace proprietary equipment from vendors like Cisco Systems.

Last week’s purchase of Nervana Systems gives Intel a much stronger presence in the growing market for deep learning applications. Fields ranging from scientific discovery to digital personal assistants to autonomous driving and much more are expected to greatly benefit from deep learning over the next decade or so. With Nervana, Intel is gaining blueprints to a new deep learning “accelerator” chip that should prove useful in cloud-based computing applications and even individual devices longer term.

Speaking of cloud computing, Intel is also hoping to highlight its growing data center business and advancements from last year’s Altera purchase at IDF this week. The FPGA (field programmable gate array) customizable chip technology that Intel acquired as part of that deal is supposed to have a big benefit for several types of cloud-based applications and services, but its impact to the bottom-line has been minimal to date.

Not all of Intel’s efforts to integrate new companies, products and technologies recently have been successful, however. After the company purchased Basis Science a little over two years ago, for example, they made a big push into wearables. Just a few weeks ago, the company seemingly gave up on the effort, though. They recalled all existing Basis smartwatches because of a potential defect that they were unable to fix which could cause burns on the wrist of users and offered no options for replacement. They also announced that they were shutting down the data service for the smartwatch at the end of this year.

Like many other maturing tech companies, including Apple, Intel is in the process of transitioning its business from one that’s been heavily weighted towards a legacy market that has likely peaked, to one that’s more focused on smaller, but growing opportunities.
The path for Intel to remain relevant won’t be an easy one, despite the company’s incredibly robust, though little-appreciated chip manufacturing capabilities. But they are making the moves to keep their presence known even after Moore’s Law becomes history.

Here’s a link to the column: http://www.usatoday.com/story/tech/columnist/2016/08/15/intels-battle-relevance/88758224/

USA TODAY columnist Bob O'Donnell is the president and chief analyst of TECHnalysis Research, a market research and consulting firm that provides strategic consulting and market research services to the technology industry and professional financial community. His clients are major technology firms including Microsoft, HP, Dell, and Qualcomm. You can follow him on Twitter @bobodtech.