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Intel bets on segmentation
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May 20, 1998: 4:54 p.m. ET
Company plans on targeting number of niches to combat PC price drops
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NEW YORK (CNNfn) - Intel Corp. executives are betting that growth in the Internet and segmentation in the computing industry will help the company continue its dominance.
At the company's annual meeting in Santa Clara, Calif., Wednesday, executives said they believe growth in the Internet and the need for machines tailored for specific markets and purposes will help combat sluggishness in Asia and falling PC prices.
Intel President and Chief Executive Officer Craig Barrett said dedicating increasing resources to research and development will also help drive the company forward.
"I firmly believe the only way you can sustain growth in our industry is [developing] new products and technology. You can't save your way out of a slowdown," he said.
Barrett said Intel will spend about $2.8 billion on research and development in 1998 and $5 billion in manufacturing technology. Part of that investment will go to a shift to newer manufacturing technologies that will allow Intel to make higher-performance chips at lower costs.
Barrett said Intel would continue to splinter its products which would range from low-cost chips for home PCs to more powerful and sophisticated processors for business computers.
"The original model in our business was creating one microprocessor and have that one product or family serve all segments of computing. The market has segmented into [products for] mobile computing, high-performance desktops and enterprise servers or workstations -- each justifying their own development," he said.
Barrett said Intel plans major product introductions in all those segments in 1998, including low-priced desktops centered around Intel's Celeron processor. Celeron is a cheaper version of the Pentium II. The price savings is accomplished by eliminating the "cache" memory used by processors to speed up their performance.
Computer systems featuring the Celeron processor recently hit the market.
Grove also said that Intel is positioned to take advantage of the segmentation by broadening its product line.
"Our industry has been driven by two forces: one is low-cost performance computing and the other is the Internet. [Internet commerce] is driving spending in business and is increasingly the single factor that is driving individual consumer purchases.
"The Internet-connected PC will be the competitive business tool of the next decade. Investment in information technology will no longer be an option, but a competitive necessity," Grove said.
Looking to the future, Grove remains bullish on Merced, a new 64-bit processor under development that Intel hopes will give it a share of the workstation market. Intel is also developing Xeon, a new chip that will provide the power needed for digital content creation, mechanical design automation, electronic design automation, software development and financial analysis.
Xeon will be introduced by mid-1998 while production on Merced won't begin until 1999.
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Intel
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