Intel Still Doesn't Get It

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You certainly can't blame a tech giant like Intel (Nasdaq: INTC) for trying new things. A company that already dominates one market can only grow so far before hitting a ceiling. But attempts to move the $123 billion silicon behemoth beyond microprocessors for desktops and laptops have led to a series of disappointments spanning several years. Unfortunately, the company's now gearing up for another dubious crack at the mobile-device sector.

Intel threw in the towel on its last foray into mobile processors in 2006, selling the division to Marvell (Nasdaq: MRVL) for $600 million. But a rejuvenated Intel is once again taking on mobile chip leaders such as Qualcomm (Nasdaq: QCOM), Texas Instruments (NYSE: TXN), and ARM Holdings (Nasdaq: ARMH) by pushing its new line of Atom processors into smartphones.

I'm a little skeptical of Intel's chances this time around. In a recent interview with the Financial Times, Intel CEO Paul Otellini said, "If you accept that the value proposition of the high end of the mobile phone market is full Internet access that happens to have voice, my view is that it's easier to add voice to a small computer than vice-versa."

Well, I certainly don't accept that value proposition. And the notion that the chief of one of the world's premier silicon makers believes that the high-end mobile phone market is essentially moving toward broadband-enabled computers with microphones attached is astonishing. While it's likely Otellini doesn't hold such a simplistic view of the mobile market, Intel has nonetheless previously shown that it believes mobile phones will move closer to computers, rather than the other way around.

Wrong. Dead wrong.

If Intel believes that a significant portion of smartphone users will be gravitating toward connected laptop functionality, more than a few warm bodies are asleep on their keyboards in Santa Clara. True, new markets for ultraportable Internet devices will likely present tantalizing opportunities, but Research In Motion's (Nasdaq: RIMM) BlackBerry is not wildly successful because it is a computer at its core. Its success lies in its efficient communications capabilities -- worlds beyond merely slapping a microphone and speaker onto a slick device.

If Intel can't keep a clear distinction between mobile computing and mobile phones, it will continue to flounder in the space. The company would be better off focusing on other areas of success, rather than trying to redefine consumer devices.

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Fool contributor Dave Mock believes the trend is your friend, so don't fight it. He owns shares of Intel and Qualcomm and is the author of The Qualcomm Equation. Intel is an Inside Value recommendation. The Fool's disclosure policy survived the '80s.

Comments from our Foolish Readers

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  • Report this Comment On June 06, 2008, at 4:50 PM, AtomChiphead wrote:

    Mobile phones not going to get more like computers? Uh, have you heard about the iPhone?

    And let's see, LG, Nokia, Samsung-- indeed the entire industry--is rushing to provide Internet capable devices that store movies, enable browsing, file sharing, and more? How is it that Intel's notion of phones becoming more like computers is 'dead wrong'? That's absurd.

    I work for the company and will admit, we didnt hit it with the ARM-based XScale approach, but this new Atom architecture is a whole different ball game and there is one thing that has been consistent throughout the successes and failures: a common vision of convergence, where computers communicate and communications devices compute. It has held true, and it's gone mainstream.

  • Report this Comment On June 06, 2008, at 6:42 PM, Leonardo17 wrote:

    Hey Dave,

    Your disclosure is a joke. You could have 20,000 shares of qcom vs. 1 share of intc for all we know.

    As to your "slapping on a microphone" statement you know damn well that's a straw man argument since Otellini wasn't suggesting anything of the kind. Convergence is happening in both directions but it can only go so far from the smart phone side as long as RIM and others keep using ARM processors. There are no such limitations with an X86 except for battery life and compactness, but with Atom those are disappearing quickly. That was Otellini's point.

  • Report this Comment On June 07, 2008, at 12:40 AM, hoodmulti wrote:

    For the younger generation, "netbook" is fantastic concept. This is what Atom processor is about.

    Check out how this lady review the netbook as a young user point of view:

    http://www.youtube.com/watch?v=0ShPGRQE3qE

    Atom at the moment is not competing against mobile phone market directly.

  • Report this Comment On June 07, 2008, at 6:39 AM, mobileguy wrote:

    Just came back from Computex. I held and played with Atom portable MIDs. They are warn and I was told the batteries last hours not days ... they have a long way to go.

    Here is a good demo: www.youtube.com/watch?v=XXYshhuJzh4

  • Report this Comment On June 08, 2008, at 3:53 PM, bobgaleotti wrote:

    Ok Dave. So you're an Intel basher. Ok, we get it.

  • Report this Comment On June 09, 2008, at 3:19 PM, AtomChiphead wrote:

    Jobs spent about an hour today talking about data services for the iPhone, including new apps that allow users to make music on the phone, add Live major league baseball updates, and so on. Plus extended battery life for up to 6hrs of web browsing.

    Internet browsing, content creation, live updates via the web. Nah, phones are just phones, they're not taking on more compute functionality....right Dave?

  • Report this Comment On June 10, 2008, at 9:20 PM, 1111gl wrote:

    First let me say I am an ARM investor.

    In the mobile space ARM's RISC processors will always trump Intel's CISC processors, if for no other reason power constraints and battery life.

    CISC chips for the PC based on the x86 architecture is fine because a seperate tower can be used for heat dissipation. Put your hand next to it to feel the heat. Where can you put that on a mobile device ?

    Common sense. Reduced is always preferred over Complex in mobile

    devices.

    Practicality. ARM has developed their cores for low power constraints and has built up an eco-system of the leading tech companies , 3rd party software developers and foundries to deliver the most robust products at the lowest prices.

    Intel has mis-directed their efforts in the telcom sector.

    They should be looking at the cell towers to deploy their processors where there is ample physical space to deal with heat dissipation.

    With an all IP network the ideal scenerio would be to have a "smart" processor at the core and a "dumb" receiver/transmitter ( handset) at the edge.

    Heavy inside/light outside.

    Intel's possibilities for telcom viability lies with companies such as Sonus Network for infrastructure buildout .............not handheld devices.

    At the end of the day the consumer will hold in his hand a device that will be his remote control to the world . It will be his wallet, contain all his personal records ( medical, DMV, charge cards, financial info, passport, etc. ) his flipper to use the TV screen as his PC monitor and yes..........even make phone calls.

    When the IP broadband infrastructure buildout

    is complete the backbone for a United Digital Network will be in place for any electrical device that has access to any network, will have the capability to use all networks for the seamless transmission/reception of all voice, video and content data in real-time.

    Integrated processors will allow for interoperability of all these disparate platforms, protocols and operating systems.

    If I was running Intel that is where I would place the emphasis of the company.

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