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Will Intel's Quieter Pitch Be Heard?

By Cliff Edwards For four days in February every year, the 3GSM confab is the place to be for cell-phone aficionados. The world's top hardware and software makers for mobile phones come together to show off their latest wares and prove they deserve a place at the table.

Big news was plentiful this year: Texas Instruments (TXN), which makes chips for much of the world's cell phones, announced Feb. 14 that it has combined two key components into one, with the potential to slash the price of high-end handsets. Silicon Valley's Openwave Systems (OPWV) announced a tie-up with Qualcomm (QCOM). Even tiny operating system company PalmSource (PSRC) talked up a slew of new deals.

PUTTING ON A NEW FACE. The world's mightiest chipmaker, however, was keeping an unusually low profile. Intel (INTC) seemed to be lost in the crowd at the giant trade show in the French resort city of Cannes. No announcements. No splashy events. No big talk about its bright future.

For once, though, that may be a good thing. Over the past two years, Intel has tried to make a splash at 3GSM with new phones and big ideas, only to belly-flop when it came time to deliver. Last year, President Paul Otellini unveiled a variety of cell-phone designs during a keynote address. A year later, they're nowhere in sight. The year before, the chipmaker's first package of cell chips was rejected by potential customers such as Nokia (NOK) and Samsung.

This year, Intel is putting on a new face. Instead of talking, the chipmaker will spend a lot of time listening, says Executive Vice-President Sean Maloney. Instead of focusing on offering just hardware to handset makers, he says, Intel needs to deliver products that include hardware and software to fit consumer demands. "That's the thing people want an answer to, and that's the way you approach this," Maloney said in an interview with BusinessWeek Online. "We'll be talking to [customers] more."

TIME FOR EXECUTION. It's a learning effort that could serve Intel well as it works to grab share from market leader TI. Its execs have complained for years that Intel gets a lot of buzz for products that few customers actually buy, while TI has succeeded in delivering on its promises, time and again.

In TI's latest 3GSM announcement, it said it had developed a single chipset that contains a modem and a processor. The new design would let cell-phone makers such as Nokia and Samsung build a relatively cheap handset that can quickly process video and handle 3-D gaming, TI noted.

Now it's Intel's turn to prove it can execute. Over the past few weeks, analysts have praised the outfit for progress in its core PC-chip business. After a series of executive gaffes and product missteps, Intel in the past month has actually moved up the dates for rolling out new processors, a big change from its history of protracted postponements. The announcements could help rebuild the chipmaker's credibility with customers, says Caris & Co. research analyst Rick Whittington.

OUTSIDE HELP. Maloney is now trying to beef up Intel's reputation with cellular customers -- a segment that's increasingly becoming a key to the chip giant's growth. While a strong player in flash memory -- which stores data in phones and other devices even when they're turned off -- Intel has struggled to produce a palatable 3G communications processor and chipset. Such radio chips are essential in mobile phones and are made by only a handful of suppliers.

In the past year, Maloney looked to experienced outsiders for help. He hired Nokia veteran Erik Anderson to head the entire cellular team. And Maloney is turning more often to Intel Vice-President Sam Arditi, a cellular industry veteran with experience in radio chips and processors -- the two key ingredients in handsets.

More important, Intel has started to display a humbler side. In the past, former execs alienated potential customers with their aggressive attitude and lack of consideration for what cell-phone makers wanted. In several instances, the chipmaker showed off handsets using only Microsoft's Windows Mobile operating system, even though it's used in only a smattering of phones.

MANY STRENGTHS. But last October, Intel announced it was collaborating with Nokia and the popular operating system maker Symbian on next-generation "smartphones." This could have broad appeal, since phones based on the Nokia Series 60 platform are licensed by Chinese manufacturer Lenovo, Korea's LG Electronics and Samsung, as well as Panasonic, Sendo, and Siemens.

On paper, Intel has plenty to offer. It has deep experience making processors that handle data-intensive applications such as video and gaming. It's a leader in flash memory. It's getting better at making radio chips. And it's creating software that might help a variety of devices -- including phones, laptops, and other handhelds -- talk to each other with ease. "We've clearly got some cross-platform software strengths," Maloney says.

The question now is whether Intel's new strong, silent stance will be popular with cellular suitors. Edwards is a correspondent in BusinessWeek's Silicon Valley bureau

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