Thursday, January 25, 2007

Been gone a while

It's been exactly a month since I posted, which is far longer than I expected. I took some post-holiday vacation and have spent much of the time since digging out and preparing for focal. I should get back on track and post some of my wip writing over the next few weeks.

I bought a new PC over the holidays just because I felt compelled to own the latest, greatest Intel offering. I really wanted a Quad, but couldn't justify the cost and don't really have the need. I suppose I can always upgrade to Quad processor in the future, especially given how quickly prices seem to come down on new processors. As a consumer, I think it's great that Intel processors are relatively cheap. By "cheap" I mean that the performance I'm getting from my new Core 2 Duo is stellar compared to a Pentium that costs almost as much. I did a fair amount of reading before buying, and was surprised to see that tide has decisively turned toward Intel processors among every group I could find, even the overclocking crowd who have been AMD evangelists for years. While reading our Q4 earnings I got to thinking about how we've essentially abandoned two great brands (Pentium and Intel Inside).

Q4 results were posted last week. It was a good news/bad news kind of announcement, and overall I think were somewhat disappointing relative to the success our products have had. Earnings were in line with expectations ($9.7B) and earnings-per-share were $0.01 higher than expected. Gross margin was up slightly, but not quite as much as expected. We set a sales record in Q4, and the average selling price (ASP) of processors was up. Overall it was clearly a good quarter. The outlook for Q1 seemed a little timid to me, which is why stock is down. If sales are up and ASP is up, why isn't our margin increasing as fast as we expected, and why is the Q1 outlook lukewarm? One analyst thinks it's because pricing is too low. The idea is that Intel is willing to sacrifice revenue to win back some market share, and Paul made a comment to this effect during the earnings conference call. I'm not smart enough to tell you whether or not it's wise to sacrifice revenue for market share, but it's clearly good for consumers.

Given how good the press is for Core 2 processors, I'm left wondering if part of the problem is due to brand recognition. Pentium and Intel Inside used to be plastered all over everything. Now it's Core 2 Duo and Core 2 Quad, which is hard to memorize, hard to pronounce, and confusing to think about. "Did you say Core tutu? What's a core?" are questions I've gotten from friends. Actually, I don't get those questions from friends until I prod them by asking what they they've heard about the new Intel products. After they ask "what products?" and I tell them Core 2 Duo, they look at me like a dog trying to decipher which direction a sound is coming from. "Core what?" is the typical response. Core 2 Quad might be easier, and I hope that a year from now we're selling only Quad processors so I can quit try to explain (badly) what "2 Duo" means. I hope someone is working a brand strategy for the next series of processors that will be as simple and popular as Pentium was.

I'm guessing that we moved away from Pentium because we needed to convey that our new processors were truly new, and built on a different architecture. I'm not sure why we abandoned Intel Inside, other than we were re-branding everything. I don't have any problem with Leap Ahead as a slogan - it's sounds good. The problem is that Inside had to be one of the most recognized logos in the world. We've spend years training consumers to ask for "Pentium" by name. People simply aren't going to ask for a "Core tutu" when buying PCs, and it wouldn't matter because that product will be replaced by Quad processors or something else. What we've lost is the word association that can be used for a whole class of products over many years. I don't think it was wrong or bad to move beyond Pentium, but we haven't replaced it with anything else that consumers can relate to.

RIP Pentium, you served us well.


Anonymous said...

You should spend some time in retail stores talking to the hourly help who sell your boxes all day long - the nomenclature Core 2 Duo is well received and very well liked. The problem with Intel is you all live in ivory towers in the factories and have no clue what creates excitement with consumers and those who sell the processors.

Anonymous said...

Sorry to be off-the-subject, but it seems to me that Intel folks are investing a lot of time with focals during the past few weeks. So much so, that regular meetings have been cancelled by managers in order to put more focus on writing reviews and R&R. Any comments?

Anonymous said...

Focal process is a shadow of it's former self. If you think managers are busy on it this year you have no clue what it was like 3 or 4 years ago. If they're telling you that Focal is the reason they are cancelling a lot of meetings I'd take that with a pinch.

Intel IT Guy said...

I would agree - focal is far less time consuming than it was previously. I'm adding a new post about it this morning.

Anonymous said...

Excuse me, but why do you blog if you never actually blog? You actually have some interesting insights that others at Intel fail to share, but a monthly posting is about as effective as Paul having someone write his blog entries for him.

Intel IT Guy said...

I get your point, and intend to blog more often than I have been. A post about my posting is comming soon.