Summary
- Intel has been accused of being an embarrassment by noted columnist, Rocco Pendola.
- While mobile execution not great, the article claims Intel's brand is worthless.
- This assertion is flat-out wrong.
If anybody wins at wearables it's not going to be Intel, a company with zero brand cachet with consumers and a legacy that will completely expire if Apple ever takes over the chip slot on its Macbooks.And, of course,
The more Intel loses, the less it can afford to lose.Now, let me be perfectly upfront and say that I actually agree with the author that "wearables" will mostly turn out to be a fad, and I further agree that Intel has no business actually selling end-devices to users (since, after all, Intel is a chip company), but the other claims... Well, I humbly offer my rebuttal.
No Brand Cachet?
According to the author, Intel has zero brand cachet with consumers. I mean, after all, Intel only
has that cutesy "Intel Inside" logo plastered onto about 80% (and
growing) of the Windows PCs on the planet. (Ironically enough, the
MacBook/iMac line don't have this branding, so Apple's piddly 16 million
computers sold per year wouldn't mean much to Intel should Apple try to have a go at it with its own chips). Oh, and the PC market is only a 300-million unit market today.Sure, you can argue that the PC market is in perpetual decline (I think the traditional PC market is on the decline, but the rise of convertibles and Intel's foray into tablets will, in time, more than offset this), but what you can't argue with is that according to Interbrand (you know, just one of the world's largest brand consultancies), Intel is the 9th most valuable brand in the world.
Yes, folks. Even though Intel blew it and is no longer the world's largest semiconductor company by market capitalization (that'd be Qualcomm (QCOM)), it still has by far the most powerful brand of any semiconductor company and, as far as technology goes, is only slightly behind Samsung.
Intel Can Afford To Lose On These Hobbies
It's
obvious that Intel's executive team collectively blew it when it came
to pursuing the mobile market - they underestimated the market and, more
importantly, the competition, so I completely agree that the clock is
ticking on its mobile strategy. This is doubly true as Intel is not only
not seeing a return on its massive ~$4b/year investment in mobile (this
is Qualcomm-level, without the Qualcomm revenues), but the PC market
(Intel's core business) is in secular decline as far as anybody can
tell, so success here is imperative.I also agree that Intel shouldn't be wasting money on acquisitions of third-rate "wearables" makers like Basis (seriously, go read the Amazon reviews of their products sometime - utterly junk), but $100 million here or there for a company that generates ~$11 billion/year in free cash flow just isn't going to break the bank. If Intel wants to make these acquisitions and potentially learn something about the industries it may want to supply chips into, then why not? All of Intel's failed mobile chips thus far have cost >$100 million each to develop, but the company presumably learned something from those failures.
Conclusion
Does Intel need to pull it together in mobile and start developing leadership products? Of course.Is the PC market in deep trouble? Depends on your definition of "PC".
Does Intel need to get a pretty significant chunk of the mobile pie in order to offset PC declines? Of course.
But is Intel's brand worthless? Will spending a couple-hundred million to learn about wearables really break the bank? Nope.
Is Intel an embarrassment? Well, do any other chip design houses own their own fabs, generate $50 billion in semiconductor revenue, and have a more valuable brand than Intel?
No.
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