Intel's Next Contortionist Act

Last week was lonely for me. After Intel (Nasdaq: INTC  ) reported record-breaking sales, much of the mainstream press gushed that the chip maker was poised for a rebound. Well, all except me. I said that Intel was paying too much to acquire new sales as a result of increased competition from rival Advanced Micro Devices (NYSE: AMD  ) .

I still hold that view, though some very intelligent posts at our Intel discussion board have made persuasive arguments in favor of a strong rebound for Intel this year. If so, yesterday's news of a reorganization could be an important first step.

Intel said it will divide its business into five distinct platform groups:

Mobility will design products for notebook PCs, handheld computers, and communications devices;

Digital Enterprise will create products for business computing;

Digital Home will create enabling technology for what the company says will be "living room entertainment applications." (Does anyone else think that sounds like a warning shot across the bow of TiVo (Nasdaq: TIVO  ) ?);

Digital Health will create products for new medical technologies aimed at research, productivity, and diagnostics;

And Channel Products will create tailored products for different regions around the globe.

In sum, the strategy seeks to replicate the success of Centrino, Intel's hugely popular enabling technology for wireless computing. In a recent interview with TheWall Street Journal, incoming CEO Paul Otellini took credit for the Centrino platform strategy and noted that it has brought the chip maker more than $5 billion in sales since its launch last year.

Given that success, it's no wonder Otellini has ordered the shake-up. But there's more to it than that -- something that makes this strategy easy to like. The platform approach reads like a grand marketing plan; an approach that asks each business unit to address what's needed, and then build products to fit. That's refreshing. Technology firms -- Intel included -- have spent years building the next great device before figuring out who'll buy it. Being a trained marketer, Otellini undoubtedly knows that's a losing strategy.

Now, lest I ruin my reputation as the resident Intel bear here at Fool HQ, let me point out one potential problem in all this. Reorganizations and Intel are like Laurel and Hardy. Or Laverne and Shirley. Or Bush and Rove. They just go together. A quick search on Google (Nasdaq: GOOG  ) finds that the chip maker last shook up its ranks a year ago, when the wireless computing and communications group was folded into its money-losing Intel communications group. Before that, Intel reorganized in 2001. And in 2000. And again in 1997. While I get the sense that Otellini's marketing approach sets this shake-up apart, the Foolish investor still has to wonder, given its history, if Intel will be back to the drawing board this time next year.

For related Foolishness:

What do you think? Will the reorganization yield immediate benefits? Will it help Intel compete against AMD? Can Intel create another success like Centrino? Debate all this and more at the Intel discussion board. Only at Fool.com.

Sorry, conspiracy theorists. Fool contributor Tim Beyers isn't short Intel. He doesn't own shares in any of the companies mentioned. To find out what stocks Tim owns, check his Fool profile, which is here. The Motley Fool has a disclosure policy.


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