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| Authors' Blog On the Shareholder's Meeting - Logan Shrine - May 17, 2007 The Shareholder's meeting overall was less eventful than last year's when angry individual shareholder's expressed their impatience and disappointment with Intel senior management. There were still disappointed individual shareholder's who wanted to know what Intel was going to do going forward with either increasing dividends or stock buy backs. One person in particular, who proclaimed that his individual holdings were 17,000 shares, wanted to know how management could justify increases in their pay (he was citing salary increases directly from the Annual Report) when the stock has been flat for the last 6 years. Barrett said something about the pay for performance of the new compensation plan, blah, blah, blah. An important observation was that many of the questions were from individual shareholders. I wasn't surprised at any of the answers to questions, but rather disappointed that Intel cares more about institutional rather than individual investors. I thought that all shareholders were created equal? Apparently not in Intel's eyes. The message was loud and clear: if you are an individual investor and you are not happy with Intel's performance, tough nookies! Get a new stockbroker! Apparently, institutional investors are sold (or snowballed) on this new and improved Intel and are not pushing for change in the boardroom or in executive management. I couldn't help but notice that no one poked holes in Intel's "new strategy" for growth. The holes were so big that any one could have walked through them. Maybe Intel's monopoly is safe and the Wall Street crowd is complacent? There just seems to be larger machinations at work here. The one question that was answered directly was when someone (seemed like they were an Intel employee) asked about more layoffs. Paul Otellini didn't hesitate to say that there would be more as Intel attempts to meet their cost cutting goals in 2007 and 2008. For those Intel employees who can't see the writing on the wall, open your eyes! The big question then becomes, who will be let go? Entitled or expendable employees? There's no doubt that the Flash business is slated for more bloodletting, especially since New Mexico will be shutting down Fab 11 and laying off 1,000 people. It's a shame that they aren't targeting areas that have been fat and inefficient for years. I can't seem to understand why they don't look at the clogged "leadership" pipeline that has had so much dead weight over the years. I still can't help but think
that Intel's volume business is still tied to Dell and that until Dell returns to health,
Intel will just chug along the way it has for the last 6 years. Unless there are
enough small or a few big assemblers in China, it's not clear where the volumes will come
from to fill those fabs. Until next time................. ================================================================================= On the Financial Analysts Meeting in New York - Logan
Shrine - May 10, 2007 Intel's BIG Gamble
These new segments below create a $30B revenue (and 900M units, with avg. asp ~$33/unit) opportunity by 2011. The caveat, according to Otellini, is that "these markets don't yet exist, so we (Intel) have to create them." Therein lies Intel's BIG Gamble. This sounds resounding familiar to Craig Barrett's proclaimation in 2000 that "Intel will be the preminent silicon building block supplier to the Internet economy." That proclaimation was Intel's foray into networking and communications silicon - which as we all know, $10B and 35 acquisitions later, was a complete failure. What's different this time is that Intel is going to try to convince all the Consumer Electronics, handset and PDA OEM manufacturers to put Silverthorne (Intel's system on a chip) into their future devices.
This sounds easy to do, but the reality is much different for many reasons. It's hard to understand what "new" markets Intel will create. Intel didn't necessarily create the PC market, IBM did and decided t o use Intel's microprocessor. The markets that they are referring to "create" already exist in their early manifestations. First, many of the cellphone handset manufacturers already offer Internet access services supporting the "mobile" (email, music, gaming, etc) Internet. Intel will have to come up with a compelling reason for OEM's to switch to their chips. I don't think that TI and Motorola are going to site by and let this happen. Second, the ultra low cost PC targeted for emerging markets will inevitably cannabalize a portion of the laptop market segment in developed markets. That's what happened in desktops, there's no reason why it won't happen in laptops. Big consumer electronics OEMs like Sony and Samsung will not cede to Intel unless they don't have an offfering of their own. Especially Sony. Sony will no doubt is building an entire ecosystem around the cell processor, with Toshiba following suit soon after. Samsung is the unknown at this point, but it wouldn't be out of character for them to go after the mobile Internet with their own chip or an Intel competitor. After all, what consumer electronics company is willing to make their brand subservient to "Intel inside?" I can't think of many who have and survived long term (I think of Dell's current struggle). The point I'm trying to make is that this 2011 $30B/900 Unit TAM is a strategic leap for a company that doesn't have a successful track record in taking strategic leaps. Sure, Intel will be successful in meeting their cost cutting targets in 2007 and 2008, but let's not throw caution to the wind and assume that Intel management can execute to this strategic leap. They haven't in the past and show no indication that they can going forward. There has never been a "killer app" and there certainly isn't a "killer hardware device" that is going to be desired by 600M people that isn't already satisfied by what's currently available - Apple's iPhone included. Until next time................. Blog's about the book |
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