Intel's Craig Barrett Takes Hard Look At 2001

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March 02, 2001 (12:00 AM EST)

Intel's Craig Barrett Takes Hard Look At 2001

Intel Corp. CEO Craig Barrett is facing dead-on what could be a tough transition year for the $35 billion chip giant.

PC vendors and solution providers are less than enthusiastic about the progress of the Pentium 4 ramp-up. The cost and performance of Intel's proprietary 850 chipset, which currently ships with the P4, are big stumbling blocks, they say.

Yet Intel executives say the forthcoming Brookdale chipset, due by the third quarter, will help spur price reductions for the P4 line.

What's more, Barrett said Intel (stock: INTC) is prepared to manufacture more than 20 million P4s this year.

"We're still planning on having the P4 ramp to be the fastest new microarchitecture ramp we've had," he said. "We're seeing rapid take up of the P4. It's getting a very rapid ramp in the marketplace."

Still, Barrett acknowledges the coming year won't be easy.

Intel is bracing for a sales slowdown as the sluggish economy tightens its grip on the high-tech industry.

Barrett said the Santa Clara, Calif., company expects first-quarter 2001 sales to drop 10 percent to 15 percent from fourth-quarter 2000 sales of $8.7 billion. And late last month, Intel took what it called "precautionary" measures by instituting a hiring freeze and delaying many pay raises.

All of these developments come at an inopportune time for Intel, which is in the process of diversifying parts of its core business to become a leading provider of Internet building blocks.

For example, the company is branching into wireless-device architectures, hosting services and peer-to-peer technology. In addition, Intel last week said it is preparing to release its long-awaited 64-bit Itanium chip next quarter.

Intel has no plans to cut back on these investments, despite the uncertain economic picture.

"You never save your way out of downturn; you never save your way out of a recession," Barrett said in a speech last week to 4,000 Intel development partners.

Indeed, Intel's long-term growth prospects remain on track and won't be derailed by the slumping economy, Barrett said.

"We are absolutely bullish about [our] long-term growth prospects, and that's what we're investing in," he said.

Some Intel business partners and solution providers, though, are concerned about the short term. Until Intel unveils a less-expensive P4 chipset and devotes more marketing muscle to the chip, these partners plan to focus on alternatives.
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