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Intel - the Silicon Gorilla December 2001

Intel - the Silicon Gorilla December 2001. Louis V. Gerstner Jr. Scott Falzone Mona Hans Jake Hindelong Karan Mehta. Chip end-market structure. Mainframes – IBM UNIX Servers – IBM, Sun, HP, Compaq and Intel PCs – Intel, AMD and Cyrix Mobile devices – Motorola, Intel….

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Intel - the Silicon Gorilla December 2001

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  1. Intel - the Silicon GorillaDecember 2001 Louis V. Gerstner Jr. Scott Falzone Mona Hans Jake Hindelong Karan Mehta Intel – Strategic Analysis

  2. Chip end-market structure • Mainframes – IBM • UNIX Servers – IBM, Sun, HP, Compaq and Intel • PCs – Intel, AMD and Cyrix • Mobile devices – Motorola, Intel… Intel – Strategic Analysis

  3. Path to the present 1968 1970s 1980s 1990s 2001 • Founded • 4004 to X86 line -licensing of chip fabrication to others -relationship with IBM • Threats from clones heats up -problems with AMD • Pentium & Pentium II • Pentium 3, Xeon server chip - focused expansion into Servers • IA-64 initiative (with HP) -break into big leagues Intel – Strategic Analysis

  4. Industry Domination • Intel sets the standard for PC chip architecture at the lower end • The server chip market has, until now, been out of the reach of Intel Barriers to Entry • Hefty Capital Investment Requirements • Steep Learning curve • Entry Deterrence MANIFESTATION • Judo Economics • Commitment • Product Proliferation IMPLICATION Intel – Strategic Analysis

  5. PC market is slowing down Intel needs to diversify to maintain profitability Price competition is driving down margins The continuance of AMD is a necessary evil for Intel and keeps anti-trust regulators at bay Fabrication and other design technologies are becoming increasingly commonplace We do not recommend IBM’s entry into the PC based MPU space Threats to Intel Implication for Intel – Strategic Analysis

  6. Intel’s competition • A potential entrant’s strategy will be determined largely by • The vendor of the technology • The computing platform it will appear in Value Performance Prod. Range Segment AMD Opportunity or conflict ? PC Focus Secondary Motorola Diverse Opportunity or conflict ? Focus Secondary Opportunity or conflict ? Sun Server Focus Secondary IBM Server Secondary Focus Secondary Intel – Strategic Analysis

  7. Service and technology lead IBM • Services profit contribution • 1995: 42% • 2001: 65% • 2003: 70+% • Technology leadership • Record number of patents • Process know-how • R & D depth • $5 billion planned investments in chip plants • Intel’s Itanium is here! • UNIX is the chip battle ground!!!! Intel – Strategic Analysis

  8. Potential chip strategies High-end • Continue to promote the Mainframe market Unix Strategy One • Increase promotion of Intel-based servers • Decrease fabrication investment and focus on licensing technology product Unix Strategy Two • Continue co-opetition • Do not promote adoption of Itanium Intel – Strategic Analysis

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