Can Intel Buy UltraBook Success?

How much money is Intel pouring into its UltraBooks? No one outside Intel knows. But you can bet it’s massive.

Intel wants to keep the price of laptops reasonably high so it can get high prices for its processors; Intel also knows that Windows 8/ARM laptops will be very cheap.

So it’s very much in Intel’s interests to get UltraBooks to succeed and maintain processor prices at a level commensurate with Intel’s margins. 

In the past, Intel has paid huge sums to get the PC-makers to do what it wants.

Just look at the amount of  money that Intel used to pay Dell to keep Dell a tame Intel house.

The US SEC reported in July 2010 that in every quarter between 2002 and 2006, Dell would have missed its numbers if it had not been for money paid by Intel.

 

Intel paid the money to obtain exclusivity in the supply of processors to Dell.

 

In Q1 2007. Intel payments represented 76% of Dell’s operating income.

 

In 2006 Intel money represented 38% of Dell’s operating profit.

 

In Q4 2004 Intel paid $25 million to meet a forecasted shortfall in Dell’s numbers.

 

Another quarter required a $70 million top-up from Intel; and another quarter needed a $125 million Intel injection.

 

An ‘Opteron Fund’ of $275 million was set up to keep Dell an exclusively Intel house.

 

When, in May 2006, Dell introduced AMD-based products Intel stopped its payments and Dell profits fell 36% that quarter.

 

In the same year as the SEC report, the boss of the US FTC concluded that Intel’s conduct “unfairly prevented companies from competing, and harmed consumers by stunting innovation, diminishing quality, and keeping prices higher than they would otherwise be.”

 

Intel is now operating under a Consent Decree imposed by the FTC.

 

We’re told that Intel has a $300 million fund to get PC-makers to develop UltraBooks.

 

Intel, it is said, is working with smaller PC companies to get them to develop UltraBooks and with component manufacturers to get prices of UltraBooks down.

 

At $1,000+ from the big manufacturers, UltraBook sales are sluggish. At $800 or $700 they might get some traction.

 

Intel wants UltraBooks to be expensive enough to support a full price for processors, but doesn’t want them to be too expensive for people to buy. It’s a tight-rope.

 

So the success of UltraBooks probably depends on how much money Intel is allowed to throw at their development under the terms of the Consent Decree.

 

And judging by the way the financial community neutered US government regulators to precipitate the credit crunch, one assumes that a $50 billion revenue company like Intel can find ways to throw a ton of money the way of the PC manufacturers.

 

Of course a ton of money hasn’t been enough to do a successful diversification job for Intel in the past.

 

Will it this time?

Tags: boss, operating profit, processors

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7 Comments

  1. Mike Bryant
    December 10, 2011 10:47

    @Robert : exactly that – huge Matlab and other DSP simulations, plus VHDL simulations and so on. Also data fitting and … some games :-)
    I know cloud computing could address most of this but personally I prefer to have all the data where I need it. My laptop is rigged so it doesn’t shut down when I close the lid so it carries on working even when I’m in car, taxi, tube or meeting.
    And yes – lots of RAM and a flash disc help as well :-)
    My desk PC has a NVIDIA CUDA card which helps most of all but I’d need a truck battery to run that if it was in a laptop !!

  2. Robert
    December 10, 2011 05:52

    @MikeB
    What do you do that really taxes the processing power of a laptop?
    I know I sometimes run spice or Matlab when I’m on the road, trying to quickly develop customer systems simulations. Apart from these tasks, I can’t think of anything else the really causes my 5 year old IBM laptop to groan. IMHO more RAM and faster disks fix the multitasking task-switch problem better than ultrafast processors.

  3. David Manners
    December 09, 2011 23:52

    Good thinking, PTcruzer, but in the Land of the Free, money talks

  4. PTcruzer
    December 09, 2011 17:39

    Personally, I’m becoming disgusted by Intel’s disturbing business behavior. The company behaves more like a mafia organization than an actual business.
    Like the Telecom monopolies that were split up, Intel should be split up, too. At least into several pieces.

  5. Mike Bryant
    December 09, 2011 14:47

    I may also be a special case but produce a MacBook Air that is Windows native and I’d buy it in a shot, as I suspect would many other business users. The problem is the first ultrabooks simply aren’t as good as the Apple product but hopefully that will change.
    A compass, gyro, etc are for phones – I want a real PC for real work whilst on the move.

  6. David Manners
    December 09, 2011 14:33

    I think you’re right, John, but my judgment may be influenced by my inclinations.

  7. John
    December 09, 2011 12:34

    Hmmm. I honestly wonder how much of an advantage Intel can carve out just by copying the Macbook Air, in a time when laptops/PCs are becoming less fashionable, and are inferior in actually quite a lot of ways.
    In order to replicate the mobile experience, you also need to add in the now-de-facto sensors (compass, accelerometer, gyro, etc.) – in what way can you practically make use of these in an ultrabook?
    In order to replicate the tablet experience, you need to do away with the keyboard. This is a two-fold challenge – the ultrabooks I’ve seen aren’t smart screen dacked to dumb keyboard, so you always have the keyboard. And the current price of Ultrabooks is for the current models that lack flip-over touch screens, which to all estimates will increase BOM by around $80-$100.
    No – they can pile in all the money they want to, I just don’t see people wanting them, or caring about them.

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