Intel - the Silicon Gorilla
December 2001
Louis V. Gerstner Jr.
Scott Falzone
Mona Hans
Jake Hindelong
Karan Mehta
Intel – Strategic Analysis
Chip end-market structure
• Mainframes – IBM
• UNIX Servers – IBM, Sun, HP,
Compaq and Intel
• PCs – Intel, AMD and Cyrix
• Mobile devices – Motorola,
Intel…
Intel – Strategic Analysis
Path to the present
1968
• Founded
1970s
• 4004 to X86 line
-licensing of chip fabrication to others
-relationship with IBM
• Threats from clones heats up
-problems with AMD
• Pentium & Pentium II
• Pentium 3, Xeon server chip
- focused expansion into Servers
• IA-64 initiative (with HP)
-break into big leagues
1980s
1990s
2001
Intel – Strategic Analysis
Industry Domination
• Intel sets the standard for PC chip architecture at
the lower end
• The server chip market has, until now, been out of
the reach of Intel
Barriers to Entry
• Hefty Capital Investment Requirements
• Steep Learning curve
• Entry Deterrence
• Judo Economics
• Commitment
• Product Proliferation
Intel – Strategic Analysis
Threats to Intel
• PC market is slowing down
– Intel needs to diversify to maintain profitability
• Price competition is driving down margins
• The continuance of AMD is a necessary evil for Intel
and keeps anti-trust regulators at bay
• Fabrication and other design technologies are
becoming increasingly commonplace
Implication for
• We do not recommend IBM’s entry into the PC based
MPU space
Intel – Strategic Analysis
Intel’s competition
• A potential entrant’s strategy will be determined
largely by
– The vendor of the technology
– The computing platform it will appear in
Segment
Value
Performance
Prod. Range
AMD
PC
Focus
Secondary
Opportunity
or conflict ?
Motorola
Diverse
Secondary
Opportunity
or conflict ?
Focus
Sun
Server
Opportunity
or conflict ?
Focus
Secondary
IBM
Server
Secondary
Secondary
Intel – Strategic Analysis
Focus
Service and technology lead IBM
• Services profit contribution
– 1995: 42%
– 2001: 65%
– 2003: 70+%
• Technology leadership
– Record number of patents
– Process know-how
– R & D depth
• $5 billion planned investments in chip plants
– Intel’s Itanium is here!
– UNIX is the chip battle ground!!!!
Intel – Strategic Analysis
Potential chip strategies
High-end
• Continue to promote the Mainframe market
Unix Strategy One
• Increase promotion of Intel-based servers
• Decrease fabrication investment and focus on
licensing technology product
Unix Strategy Two
• Continue co-opetition
• Do not promote adoption of Itanium
Intel – Strategic Analysis