Intel Fights For Its Future

["Dave Farber" <farber () gmail com>]

Begin forwarded message:

> From: Dewayne Hendricks <dewayne () warpspeed com>
> Date: March 14, 2018 at 4:17:23 PM EDT
> To: Multiple recipients of Dewayne-Net <dewayne-net () warpspeed com>
> Subject: [Dewayne-Net] Intel Fights For Its Future
> Reply-To: dewayne-net () warpspeed com
>
> Intel Fights For Its Future
> The Smartphone 2.0 era has destroyed many companies: Nokia, Blackberry, Palm… Will Intel be another victim, either as 
> a result of the proposed Broadcom-Qualcomm combination, or as a consequence of a suicidal defensive move?
> By Jean-Louis Gassée
> Mar 11 2018
> <https://mondaynote.com/intel-fights-for-its-future-6498f886992b>
>
> In November 2017, Broadcom (revenue $17.6B, market cap $104B) announced its intent to acquire Qualcomm (revenue 
> $22.9B, market cap $93B). Simplifying for today’s purposes, these two companies make a range of competing and 
> complementary chips used in networking and wireless applications. Notably, Qualcomm makes Snapdragon CPUs for 
> smartphones and wireless modems that connect mobile devices to cellular networks. Broadcom fields an impressive (if 
> indiscriminate) product portfolio, the result of a series of corporate accretions.
>
> In spite of its successful record of Mergers and Acquisitions (M&A), Broadcom’s proposal didn’t go over well.
>
> First, it looks very expensive: Broadcom’s opening bid was $130B. Qualcomm recently let it be known they’d consider 
> $160B.
>
> Second, it raises national security concerns. Avago, a Singaporean company, acquired Broadcom — and assumed the more 
> recognized name — in 2016. To conciliate US objections, Avago/Broadcom now promises to redomicile itself in the US.
>
> Finally, the combined entity might be too big, anti-competitive. Of course, this is the idea: combine corporate 
> bodies to achieve better “supply harmony” a.k.a. pricing power. But is it really “too big”? The combined revenue of 
> the two companies is in the $40B range; compare that to the $200B or more achieved by real giants such as Amazon or 
> Apple.
> Or let’s see that $40B next to the $63B earned in 2017 by Intel, the subject of this examination.
>
> Intel sees the Qualcomm+Broadcom combination as an existential threat, an urgent one. But rather than going to the 
> Feds to try and scuttle the deal through a long and uncertain process, Intel is rumored to be “working with advisors” 
> (in plainer English, the company’s Investment Bankers) on a countermove: acquire Broadcom.
>
> Why the sudden sense of urgency? What is the existential threat? And wouldn’t the always risky move of combining two 
> cultures, employees, and physical plants introduce an even greater peril?
>
> To begin with, the threat to Intel’s business isn’t new; the company has been at risk for more than a decade. By 
> declining Steve Jobs’ proposal to make the original iPhone CPU in 2005, Intel missed a huge opportunity. The 
> company’s disbelief in Apple’s ambitious forecast was badly mistaken: More than 1.8 billion iOS deviceshave been sold 
> thus far.
>
> Intel passed on the biggest product wave the industry has seen, bigger than the PC. Samsung and now TSMC manufacture 
> iPhone CPUs. Just as important, there are billions of Android-powered machines, as well. One doesn’t have to assume 
> 100% share in the smartphone CPU market to see Intel’s gigantic loss.
>
> One may wonder why then-CEO Paul Otellini didn’t make Apple an offer they couldn’t refuse: Access to Intel’s superior 
> silicon manufacturing technology. At the time, Apple had nothing; Intel held all the cards.
>
> But a poison had infected Intel execs’ minds, creating a durable Reality Distortion Field. The poison was the 
> company’s rightfully celebrated history — Intel put the silicon in Silicon Valley, after all — and, even more 
> poisonous: Wintel. The company didn’t have a complete Windows CPU monopoly but they depended on Microsoft for its x86 
> margins
>
> A few years later, after the dramatic rise of ARM-powered smartphones, Intel execs’ faith in Wintel was unshaken: 
> “The temporary advantage these less sophisticated, Windows-less ARM chips are enjoying will be erased by the superior 
> silicon manufacturing process of the x86. It’s nothing…”
>
> [snip]
>
> Dewayne-Net RSS Feed: http://dewaynenet.wordpress.com/feed/
> Twitter: https://twitter.com/wa8dzp



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