Intel CEO Brian Krzanich

Intel lays out five-point strategy for leaving the PC behind

Trade
PIctured: Intel CEO Brian Krzanich introducing the Edison PC at CES 2014. Source: IDG

27 April 2016

The message has trickled down in speeches, earnings calls, and analyst presentations, but on Tuesday, Intel chief executive Brian Krzanich (pictured) drew a line in the sand: Intel is not a PC company any more.

In what only can be called a manifesto of Intel’s new values, Krzanich described how Intel is transforming itself “from a PC company to a company that powers the cloud and billions of smart, connected computing devices”. To drive the point home, Krzanich noted that the PC is just one among many connected devices.

What might be called the ‘new’ Intel will be built upon five pillars, Krzanich said:

  • The cloud – including servers, data centres, and virtualisation
  • Connected ‘things,’ such as sensors, autonomous vehicles, or PCs
  • An evolving memory business, from 3D XPoint memory to advances in server and data centre infrastructure
  • Connectivity, specifically 5G networking
  • Manufacturing and the underlying fab technology.

About 40% of Intel’s revenue and 60% of its profit margin already come from outside the PC, Krzanich said last week, when the company began publicly signalling its new focus. “It’s time to make this transition and to push the company over all the way to that strategy and that strategic direction,” Krzanich said then. “That’s why we wanted to do it now.”

Cloud first
Historically, Intel has been built on a single foundation: the microprocessor, which powered the majority of the world’s PCs, then servers, then notebooks. Now, Intel’s evolution looks surprisingly like that of Microsoft: predicated upon the cloud and potentially billions of connected, mobile devices, with a broad, diversified product line to address a multitude of opportunities.

“We will also lead by becoming a company with a broader focus, and with sharper execution,” Krzanich wrote. “ In doing so, we will create lasting value for our customers, partners and shareholders, and achieve our mission to lead in a smart, connected world.”

You had only to attend Intel’s Intel Developer Forum conference last August to see this coming: Krzanich barely mentioned the company’s Skylake PC processor, focusing on Intel’s push in the Internet of Things instead. The same goes for Krzanich’s CES 2016 keynote address, where he played ringmaster to a circus of devices showing off Intel’s embedded silicon. Finally, Krzanich reorganised Intel shortly before announcing its first-quarter earnings, where he divulged that each of its PC and IoT projects were being evaluated for possible cancellation.

Now, like Microsoft, Intel sees the cloud as the driver of Intel’s business. The company can charge thousands of dollars for a Xeon processor that powers a server, but just a fraction of that for a standard Core chip.

Krzanich wrote that Intel plans to attack the data centre on two key fronts: virtualisation, which creates demand for pricey, high-end chips by using them to power many virtual PCs in the cloud; and analytics, which takes all the data being collected by the cloud from sensors and other devices, and extracts information from it. The latter capability, of course, requires even more server hardware.

Krzanich also pledged to drive “more and more of the footprint of the data centre to Intel architecture.”  Try as it might, AMD has continued to lose share in the enterprise – though it recently tried to steal some back with a licensing effort.

Putting the PC in its place
For months now, Intel executives have offered variations on the same line: “Everything’s connected, and everything that’s connected, computes.” Intel plans to lead in the technology around connected things, Kzanich pledged.

“’Things’ range from PCs to what we now call the Internet of Things,” Krzanich explained. “The Internet of Things encompasses all smart devices – every device, sensor, console and any other client device – that are connected to the cloud. The key phrase here is ‘connected to the cloud’. It means that everything that a ‘thing’ does can be captured as a piece of data, measured real-time, and is accessible from anywhere.”

In Intel’s world, devices are simply means of producing (not consuming) data. And the amount of data you produce, tapping away at your computer, is potentially minuscule compared to the data sampled by the LiDAR  sensor of a self-driving car. That’s important to realise: At one time, PCs demanded so much data that they could bog down the available network bandwidth and compute power of a client device. Today, machines talking to machines generate those workloads.

“At Intel, we will focus on autonomous vehicles, industrial and retail as our primary growth drivers of the Internet of Things,” Krzanich wrote. “Similarly, we view our core client business of PCs and mobile as among the many variations of connected things, which is driving our strategy of differentiation and segmentation in the Internet of Things business.”

Doubling down on 5G
What’s unclear about that strategy is whether Intel intends to compete with ARM in powering smartphone processors. The recent, quiet departure of a key embedded exec, Aicha Evans, indicates that Intel has failed for the moment.  But Krzanich and Intel clearly intend to double down on their investments in 5G connectivity, as Krzanich pledged that Intel would lead in this new sector.

“Threading all of this virtuous cycle together is connectivity – the fact that providing computing power to a device and connecting it to the cloud makes it more valuable,” Krzanich wrote.

It’s worth noting that Intel has invested heavily before in next-generation wireless solutions that failed miserably (WiMAX, anyone?) This time around, however, Intel apparently is pursuing a more conventional route.

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