Intel: Gremlins Inside?

Oops, not again! Another major new Intel (Nasdaq: INTC  ) product has hit a snag. Intel is pushing back the launch of yet another widely anticipated processor, telling customers it will hold off bringing to market its Liquid Crystal on Silicon chip for widescreen TV panels.

Nobody minds the occasional mistake. But when it becomes a pattern, it should ring alarm bells. It's hard to find a new Intel product that hasn't suffered a design hitch or a launch delay of some kind in 2004. Here is a rundown of the setbacks this year:

  • Cancellation of its next-generation Tejas Pentium PC chip
  • Recall of its faulty Grantsdale chipset
  • Delayed launch of Dothan mobile processor
  • Delayed launch of the Alviso chipset for notebook PCs
  • Bugs in the Lindenhurst server chipset
  • Delayed launch of its Pentium 4 chip until 2005

The long list of missteps raises a big question: Has Intel's ability to execute on its product roadmap -- long the feature that set the company apart -- started to wither?

Much of Intel's value is in its ability to crank out the "latest and greatest" processors on time. Any hint that it can't stay on the treadmill could threaten Intel's ability to uphold its high-end prices. Remember, Intel has very high fixed manufacturing costs, so any downward pricing pressure can quickly put a big dent in the chip giant's margins and bottom-line earnings.

Intel's attack of the gremlins could be great news for competitors. Glitches and delays give Intel's technology partners a good reason to hedge their bets on other chip suppliers. Delay of the Pentium 4 chip may shift customers to Advanced Micro Devices (NYSE: AMD  ) , which is impressing the industry with its own 64-bit chip. Consumer electronics giant Samsung is eyeing Texas Instruments' (NYSE: TI  ) chip for widescreen TVs.

Sure, it will probably take more than some missed deadlines to seriously undermine the chip sector's 800-pound gorilla. But the string of problems at Intel certainly raises the company's risk profile. Intel's share price, well down from its high, is probably where it belongs.

Fool contributor Ben McClure hails from the Great White North. He doesn't own any companies mentioned here.


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