Investment analysts were bullish on Intel, the world’s largest chipmaker. They had upped their earnings forecast for the company in anticipation of its third-quarter earnings. They reasoned that the demand for personal computers (PCs) in the third quarter of the year (July to September) had been stronger than expected, in particular for notebooks. And Intel’s Atom processor is the ‘heart’ of notebooks. They were right. Not disappointing investors, Intel posted sales that surpassed projections by as much as $1 billion. Its revenue at $9.4 billion was up $1.4 billion from the prior quarter although less than the year-ago quarter of $10.2 billion. The company said the numbers offered evidence of a “recovering market”.
In a chat with Leslie D’monte, Intel Managing Director (sales and marketing) South Asia Ramamurthy Sivakumar charts out the company’s strategy. He speaks not only about the company’s success with Atom processors in notebooks and nettops (small desktops) but also about the inroads Intel has made into wireless technologies like WiMAX, software (yes, you read it right) and mobile internet devices (MIDs).
What is the key to Atom’s success globally and in India?
It has been a little over five quarters of shipment for the Atom processor (currently Intel’s smallest and lowest power processor which powers the latest MIDs as well as the other category of devices for the internet called netbooks and nettops). Initially, we thought the processors would find their way in low-cost PCs and netbooks. Logically, we believed that low prices would work. However, we were surprised to realise that not many first-time buyers purchase low-cost PCs. New buyers prefer fully-loaded PCs. The reason is that, more than often, two or more family members use the PC. Netbooks, on the other hand, are generally the second or third device for users since they are easy to lug around. This is perhaps the reason why netbook sales were higher in the developed markets rather than emerging markets.
What helped the sales of Atom processors in India was the fact that we had a dedicated motherboard (system on a board) which re-energised sales. Large channels (distributors) tend to flourish when they can adopt new technologies swiftly and with ease. Since the motherboard was easy to integrate with PCs, original equipment manufacturers (OEMs) and unbranded PC makers (assemblers) too lapped up the processor. Thus, nettops and netbooks penetrated deeper into the non-PC markets too. In fact, most of the growth in the desktop category was fuelled by the sales of nettops. Power supply, however, does pose a problem. This is one reason why notebooks (which have a battery) are popular. We have to find out some way of integrating a battery with the nettop to make it work when there’s no power. The technology exists, but getting the price right for emerging markets is a problem.
You are bullish on MIDs too. How much progress has Intel made in this space? And when does India see the first MIDs?
Mobile Internet Devices or MIDs represent a new category of small, truly mobile devices that give you an amazing internet experience — they allow you to communicate with others, enjoy your favourite entertainment, and access information on the go. Consumer electronics and PC companies are using our Atom processor technology to deliver exciting new products for consumers and business users. This latest generation of small, powerful, highly portable internet-connected devices combines many great capabilities with the convenience of a pocket-sized solution for life on-the-go. As devices get smaller, sleeker, and lighter than ever, consumers will be able to choose from a variety of exciting new devices and meet the demanding needs of their highly mobile lifestyles.
We already have over 50 form factors out in the market. While I cannot speak on behalf of OEMs, it’s my sense that by the end of this year, or early next year, India too will start seeing MIDs in some form or the other. These will initially cater to the edutainment and infotainment markets. Services will be bundled with MIDs. We currently have three-chip platforms which will be brought down to two-chip platforms by 2011. This will result in smaller form factors and lower power consumption, while simultaneously delivering higher performance. MIDs will offer a very interesting proposition once 3G and WiMAX spectrum (after the auctions) is allocated.
What’s the progress you’ve made with WiMAX? How well does it tie in with the PC ecosystem now?
Our belief is that a very large population of India will go wireless. In fact, many already have, as you know. It’s here that Worldwide Interoperability for Microwave Access or WiMAX makes tremendous sense. Globally, we have already shown how WiMAX chips can be integrated with PCs. Soon you will have WiMAX chipsets on the motherboard with an antenna (inside or outside the box). Once the fully-integrated system gets tested on the network (to reduce failure rates), they will be ready for shipments. We also have 40-odd WiMAX dongles which can be plugged into universal serial bus (USB) ports to connect to the WiMAX networks in countries where the spectrum has been alloted. (In India, the likes of Bharti TeleVentures, Reliance, SIFY, BSNL and Tata Communications [earlier VSNL] have all acquired WiMAX licenses in the 3.3-GHz range and are in various stages of trials. Once WiMAX auctions take place, it will open up a plethora of opportunities for vendors).
Post the Wind River Systems acquisition, your focus on the software business has sharpened. How are you leveraging your software strengths?
Many may not know this but historically too a huge part of Intel has been software. In fact, we have more software than most software companies. But with the acquisition of Wind River Systems, we are enabling applications and developing a broad range of capabilities to accommodate the new technology needs of consumers. (Wind River is a leading software vendor in embedded devices, and will help Intel grow its processor and software presence outside the traditional PC and server market segments into embedded systems and mobile handheld devices.)
The acquisition will deliver to Intel robust software capabilities in embedded systems and mobile devices, both important growth areas for the company. Embedded systems and mobile devices include smart phones, MIDs, other consumer electronics devices, in-car infotainment systems and other automotive areas, networking equipment, aerospace and defence, energy and thousands of other devices.
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