Intel Comes Back Swinging

Despite Intel’s disappointing second-quarter earnings, the world’s No. 1 chipmaker has come back swinging — still aggressively pursuing its e-commerce quest.

Last week, the Santa Clara, California company once again displayed the stubborn resilience of a champion prizefighter by shaking off what could have been a knockout punch and immediately scoring points on its opponent by counter punching. Intel’s opponent has been a marketplace in transition, where its primary product — the microprocessor–no longer offers long-term growth or profitability.

But instead of fighting the inevitable, Intel has embraced change and is quickly reinventing itself, which is evident by a series of steps it announced last week:

To increase its focus on e-commerce, Intel said it would restructure several of its key hardware and software business groups into a Communications Products Group. This group will bring together the Communications and Internet Server Division Group, the Dialogic subsidiary, the Network Systems Division and the Systems Management Division. John H.F. Miner, an Intel vice president, will head the new group.

Intel will team up with Cisco Systems, Inc. to begin making high-speed modems aimed at the growing consumer market for faster Internet access. Intel added that the time is right to enter the modem business because the emerging mass-consumer markets are defining technology standards. This seems like a smart move since subscribers to Digital Subscriber Lines (DSL) are expected to mushroom by 150 percent in 1999 and reach 2 million by 2000, according to a report by Cahners In-Stat Group, an industry analyst firm.

Intel pumped more than $4 million (US$) into HealthAxis.Com, an Internet-based health insurance agency operated by Provident American Corp. By doing so, Intel joins America Online, First Heath Corp., Tudor Investment Corp and UICI Corp., which have also invested in the burgeoning online insurance agency. So, even though Intel took it on the chin because of its less than stellar quarterly performance, it’s still holding its e-commerce course. Nonetheless, there are some industry experts that say Intel must ratchet up its e-commerce activities even more — if it hopes to deliver knockout punches to its chief e-commerce rivals such as AOL and Microsoft Corp.

Otherwise, Intel might have to be satisfied with a draw.