Did you hear, Intel may be going out of business soon?
The graph here shows the stock prices of Intel Corp. in the last 6-months…not looking too good. Although, the poor economy has not helped any company in the last few years or so, even technology companies that are continuously innovating and have high demand for, in the case of Intel, the poor economy isn’t the only issue. The most important factor of Intel’s falling stock prices is the company’s main production strategy in regards to microprocessors. A few years ago, Intel had to answer quite a big question, strategically – continue to manufacture chips for PCs (personal computers) or invest in new technology and, not only focus on PCs, but also smartphones and tablets? As you may know by now, Intel continued to focus on PCs and did not make itself a major competitor in the smartphone and tablet markets. Moving forward to 2012, the first time in seven years that PC sales have dropped, Intel is facing major critical problems.
Intel was founded in 1968 and the headquarters are located in Santa Clara, California. The corporation employs more than 100,000 employees all over the world. In 2011, the net income of the company was nearly $12 billion. Therefore, it’s not too probable that such a large company will go out of business anytime soon; yet, a warning sign has been issued for the company and it will be very interesting to see how Intel performs in these critical times.
Another issue Intel is facing is Apple bringing up some talks about whether it should start manufacturing its own chips for Apple computers. Since 2006, Intel and Apple have been
partners in which Intel produces the microprocessors for Apple computers (e.g. MacBook, iMac). On the other hand, Apple has been the manufacturer of iPhone and iPad chips, rather than giving the job to Intel. During this process, Apple has invested a lot of time and money to learn the gists of producing chips and has done a great
job thus far. In the last week or so, there have been rumors that Apple may end its partnership with Intel and begin producing microprocessors (e.g. A6 on iPhone 5) for its computers as well. Although this may be just a tactic for Apple to get Intel to do one of two things:
1) produce “Apple-only” microprocessors that are extremely innovative and/or further enhanced than other Intel chips
2) lower prices
Apple most certainly has the upper hand at this point and therefore according to Michael Porter’s Five Competitive Forces Model, Apple has the buyer’s bargaining power. However, since no one truly knows how advanced Apple has become in producing chips and microprocessors, Intel cannot gamble on losing one of its biggest customers.
Lastly, to top it all off, Paul Otellini, Intel’s CEO and current president, announced an early Thanksgiving message to the company and its stakeholders – Otellini will be retiring early at age 62, three years before Intel would ask him to leave, even though he had been asked earlier about retirement and he stated that he was not retiring anytime soon. Otellini has been with the company for more than 38 years. He also serves on the board of directors for Google. He won’t have to go around looking for work anytime soon but the fact that he has decided to retire is BIG NEWS for intel, indeed.
It will be extremely important for Intel to come up with the best solution moving forward: the falling stock prices, strategy on manufacturing microprocessors for devices, Apple’s partnership, Otellini’s leave, etc. It may take Intel Corp. a few months or even years to figure it all out but as we know, this highly competitive market does not allow one to take time to think but rather expects the company to be prepared and make a decision as soon as possible. For now, it’s time for news agencies to spread more rumors and keep the hype going.