Intel (US)

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It's not just computers that have 'Intel Inside'. Since 2006 the US chipmaker has attempted to widen its market to handsets and other high-end devices, albeit so far with less success than with which it dominates the PC sector. It is pushing hard into the "internet of things" market, as demonstrated by, among others partnerships, one with Tag Heuer in 2015 to develop a luxury smart watch. The world would be a very different place had it not been for the American company that invented the microprocessor, a tiny silicon chip that allows electrical products to "think" for themselves. Almost all electrical appliances now contain microprocessors, from toys to washing machines, from cars to traffic lights, from telephones to thermostats. And computers of course. Around 80% of PCs worldwide operate on Intel microprocessors, and the company has powerful alliances with most of the world's biggest manufacturers. Intel also makes a variety of other memory chips and computing components. After a slowdown in the market in 2008 and 2009, the group was back in growth mode by 2010. However the shift towards smartphones and tablets - not an area of strength for Intel - began to create problems in 2012, prompting the company to launch a bigger push for its own line of Ultrabook laptops, as well as a series of acquisitions of chip manufacturers specialising in other sectors, not least cloud computing. It is increasingly trying to position itself as a "data-centric" not "PC-centric" company.

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Adbrands Daily Update 23rd Jul 2019: Apple agreed to acquire Intel's smartphone modem chip business, part of a wider strategy to take component manufacturing inhouse to counter slowing sales of iPhone. The deal includes 2,200 Intel employees as well as patents, equipment and leases, and will relieve some of the pressure on the chipmaker, which has long struggled to establish a leading position in smartphone components equivalent to its dominance in PCs. It acquired the modem business in 2014 from Infineon, but currently Apple is its own customer. These operations are currently thought to losing Intel as much as $1bn a year. That's also how much Apple will pay to buy the business, making it the second biggest acquisition in Apple's history behind Beats Electronics. Despite its size, Apple has always avoided large purchases, preferring to develop organically. No other acquisition has ever exceeded $500m.

Adbrands Daily Update 25th Jan 2019: Intel enjoyed a banner year in 2018, with revenues and profits at record highs. Topline jumped by 13% to $70.8bn while net income more than doubled to $21.1bn. Tax cuts played their part but pre-tax operating income was up 29% year-on-year as a result of a renewed surge in PC sales and the rapid growth of cloud computing worldwide. Oddly enough, only the Intel division focused on Internet of Things products - generally considered to be the next big thing in computing - reported weakness in the final quarter. Investors were spooked, too, by a warning that current growth will be much slower, and also by the fact that Intel still has to find a suitable full-time CEO to replace Brian Krzanich. CFO Robert Swan remains acting CEO for the time being.

Adbrands Social Media 3rd Aug 2018: FRIDAY CLASSIC: Intel "Rock Star" by Venables Bell & Partners (2009). This year (or in fact July 18th last month to be precise) marks the 50th anniversary of Intel, the business that has arguably done more to make the computing revolution of the past half-century possible than any other company. For a corporation specialising in technology components that consumers can't actually buy directly it has an unusually high public profile. That's because marketing has always been an integral part of its DNA. ...[Story continues here]..

Adbrands Weekly Update 28th Jun 2018: Intel CEO Brian Krzanich resigned after an internal investigation revealed he had conducted an affair with a fellow employee, in contravention of company policies of non-fraternisation among managers. The affair began almost a decade ago, before Krzanich became CEO, and ended a year or two after his promotion to that role in 2013. Yet Intel's board has declined to bend from its stated policy. The company appointed CFO Robert Swan as interim CEO until a permanent successor can be appointed. The story emerged, apparently, because the woman in question, who still works at Intel, mentioned the affair to a colleague. Knowing that Intel's policies forbid such relationships, this colleague reported the relationship to the company's inhouse counsel. Krzanich's departure coincides with growing worries about Intel's next generation of chips. Though the company is firing on all cylinders financially, it has experienced continuing manufacturing problems with its latest generation of chips.

Adbrands Weekly Update 1st Feb 2018: Intel shrugged off its recent embarrassing chip flaws and demotion to second place in global semiconductors behind Samsung with its own set of record revenues in 4Q, pushing the full-year to a best-ever $62.8bn, well above investors' expectations. The strongest performance came from the group's "data-centric" units, up by a combined 16% year-on-year, compared to just 3% from the PC chips division. A one-off hit from tax reform in the final quarter cut net income by 7% to $9.6bn, but the adjusted figure excluding charges jumped 27% year on year.

Adbrands Weekly Update 11th Jan 2018: The reputation of Intel, and its smaller chip rivals AMD and ARM, was tarnished by the revelation that security flaws in virtually all the processor chips that power PCs and other computing devices make them vulnerable to hackers. Though no specific attack has been reported, researchers found a loophole through which hackers can potentially access data held in a device's short-term memory, including passwords or credit card details. Google said it discovered the security flaws early last year and has already incorporated a fix into the latest version of its Android operating system. It informed Intel of its findings in June last year, and the chip maker has been working since then with its software and hardware partners to introduce similar fixes for other systems. It's virtually impossible to plug the hole without replacing the chips, but software can be adapted to bypass the potential problem. That's not always easy. Some older PCs powered by AMD chips were rendered unusable this week after a security patch for Windows was applied. In an even more embarrassing development for Intel, its CEO Brian Krzanich was found to have sold all but the minimum level of shares and options he is required to hold under his terms of employment, netting him a gain of $25m. The company said there was no connection between the sale and the discovery of the flaw, but several commentators have expressed surprise at the size and timing of the sale, given that Intel's senior management team was already actively aware of the potentially serious flaw in its products. There was even apparently some discussion of a possible global recall of all its chips, which would have had a catastrophic impact on Intel's value.

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Free for all users | see full profile for current activities: During the 1950s, Bob Noyce and Gordon Moore were two of the founders of US technology company Fairchild Semiconductor. In 1959, Noyce developed the first integrated circuit, which allowed miniature electronic circuits to be stamped onto a single silicon chip. By the late 1960s, Noyce and Moore were frustrated with the way Fairchild was developing and wanted to set up their own business. In particular they felt that computer memory could be stored on miniature chips rather than on magnetic media such as tape or disk drives. In 1965, Moore devised a planning model later known as Moore's Law. This predicted that the number of transistors that the industry would be able to place on a computer chip would double every year. (Incredibly, the model was to remain true for the next 30 years, until Moore revised it to doubling every two years).

Backed by venture capitalist Art Rock, they set up as Intel, short for Integrated Electronics, in 1968. Recruiting another ex-Fairchild engineer, Andy Grove, they started by making RAM memory chips for mainframe computers. But in 1970 a Japanese client, Busicom, commissioned a new order. Busicom asked for 12 custom-built logic chips to run a low-cost desktop calculator. Instead Intel decided to amalgamate the 12 separate chips as one, designed so that it could be controlled by software, instead of having its programming built-in. After nine months of development, the first microprocessor was born in 1971. Smaller than a thumbnail, it contained as much computing power as ENIAC, the first mainframe computer developed in 1946, which had filled 3,000 cubic feet and weighed 30 tons.

Unfortunately, the technology had been funded by Busicom, so they owned it. Noyce and Moore bought out Busicom for $60,000. (The Japanese company went bust a year later). The other catch was that no hardware manufacturers were making products capable of using this revolutionary new technology. Intel mounted a huge campaign designed to let the electronics community know what they'd devised. In fact the first electrical products to use microprocessors had nothing directly to do with computers - they were supermarket scales, traffic lights and telephones. In effect, microprocessors allowed traffic lights to operate independently, as opposed to being wired into a huge city-wide network. Supermarket scales could convert weights into prices and print labels. Telephones could hold numbers in memory for speed-dial or redial.

However gradually computer hobbyists also began to incorporate Intel's chips into their amateur projects. Effectively the first personal computer was the Altair, sold to hobbyists as a DIY kit. It was launched in 1974, using Intel's third-generation processor design, the 8080 chip. Shortly afterwards, two Seattle-based programmers named Bill Gates and Paul Allen set up a small software partnership called Microsoft to write a simple programming language for the Altair. Meanwhile, Intel acquired watch manufacturer Microma and began manufacturing digital timepieces powered by microchips. It was a bad call. The company was quickly overtaken by Japanese manufacturers, and Intel disposed of the business in 1978.

In 1981, computer giant IBM took the decision to sub-contract some of its technology for the first time in order to develop the first commercial personal computer. It selected Intel to provide their fourth generation 8088 microprocessors, and commissioned Microsoft to supply the operating system. A year later, the 80286 - usually called the 286 - was the first chip to be reverse-compatible with software written for its predecessors. In an attempt to make the 286 an industry standard, Intel licensed the technology to smaller company Advanced Micro Devices (AMD), but quickly found they had created a competitor not a collaborator. Meanwhile Japanese rivals forced Intel out of the less profitable memory business, as well as the wider non-computer processor market. The company reinforced its position by concentrating on PC chips, launching the Intel386 in 1985. This was capable of multi-tasking - allowing the computer to run multiple programs at the same time. The 486, launched in 1989, was even faster. However, AMD sued for being shut out of the new technology and a series of lawsuits dragged until the mid-1990s.

In 1993, Intel developed a new family to replace the 86 series, the Pentium series. Containing 3.1m microscopic transistors and circuits each 1/300th the width of a human hair, the Pentium was 1,500 times faster than Intel's first 4004 chip. The Pentium Pro launched in 1995, followed by Pentium II in 1997. The company also began to diversify its range, custom-designing specific sorts of chips for different types of applications instead of the one-size-fits-all approach of previous CPUs. The Pentium II was specifically designed to provide enhanced multimedia; however this wasn't always the most important requirement for different computers. So the Pentium II Xeon range, launched 1998, was introduced for servers and workstations, which specialise in networked business applications. The budget range of Celeron chips, also 1998, offered high multimedia performance at lower prices for home users. The Pentium III, launched in 1999, is top of the range with enhanced handling of multimedia as well as demanding business computing. It is being superseded in 2000 by the company's newest chips, the Itanium processor, and Pentium 4. Advances in technology mean that the company can now stamp more than 10m transistors on a silicon chip, using circuits 1/1000th the width of human hair.

In 1997 the company also began a program of acquisitions to reinforce its product portfolio. During the 1980s, smaller company CHIPS had proved a thorn in Intel's side as a manufacturer of clone microprocessors, undercutting Intel's prices. By the 1990s, CHIPS had become a specialist in graphics controllers for portable computers. Intel paid $420m to buy the business in 1998. It also settled a lawsuit from Digital, who claimed the Pentium chip plagiarised their rival Alpha CPUs, by paying $700 to acquire Digital's semiconductor business.

Later that year Intel moved into networking, buying Level One Communications for $2.2bn. It paid a further $780bn for computer telephony business Dialogic in 1999, followed by $1.6bn to purchase cellular communications software maker DSPC. Intel also invested $100m for a strategic alliance with Korea's leading semiconductor manufacturer Samsung. There were a series of stock-based acquisitions during 2000 in a variety of companies including networking processor company Basis Communications ($450m), communications software designer Trillium ($300m), Danish chipmaker GIGA ($1.25bn) and circuit board maker Ziatech ($240m). The rivalry with AMD resurfaced in 2000 when the smaller company beat Intel to the launch of a 1-gig processor by two days. But Intel's close ties to Dell, Compaq, Microsoft and several other major developers have effectively closed out AMD from the top tiers of the computer industry.

In early 2001, the company raised the stakes even further in chip development, announcing they had perfected the technology to make microprocessors containing more than 400m transistors by 2005. Intel's current top-end chip, the Pentium 4, has 42m transistors. The group also spent almost $2bn in cash and stock to acquire a number of smaller technology developers during the year, including wireless communications company Xircom, semiconductor maker VxTel, components company Cognet and fire-optics developer LightLogic. The Itanium 64-bit microprocessor for servers, developed with Hewlett-Packard, finally launched in 2001, several years later than planned. The group sealed a deal to become the exclusive supplier of server chips to Compaq; however AMD's new Athlon chip for PCs loosened a small part of Intel's hold on the desktop market. Intel won back the lost ground with substantial price cuts, and a string of even faster Pentium chips.

Although the group has consistently held onto its leadership of the market, the economic downturn in 2001 and 2002 hit hard. Sales dropped more than 20%, as both unit volumes and chip prices fell in response to slower demand. Net income plummeted from $10.5bn in 2000 to just $1.3bn in 2001. However 2003 saw a strong recovery throughout the industry, and Intel was no exception.

Yet at least some of Intel's recovery was supported by aggressive and sometimes unfair behind-the-scenes negotiations with manufacturers and retailers, in which it paid computer makers to limit the number of chips they sourced from competitors. This led to a lawsuit from main rival AMD which resulted in fines in several countries. The most significant of these was an unprecedented €1.06bn fine handed down by European regulators in Spring 2009. The EU found that Intel had given large discounts to several manufacturers on condition that they buy some or all of their components from the company, and paid electronics retailer Media Markt, a unit of Metro Group, to sell only Intel-based machines in its stores. Intel vowed to appeal against the fine.

For several years, the group was determined to cross over from computer components into traditional wireless handsets, but these operations incurred heavy losses as Intel had difficulty breaking the stranglehold of rivals such as Texas Instruments and Freescale on the mobile phone sector. The Intel Communications Group's products included wired and wireless networking and connectivity products, application processors and chipsets for cellular handsets and handheld devices. Brand names include StrataFlash memory for high-end cellular phones and XScale processors. Performance improved dramatically in this unit in 2004, with sales rising almost 30%, but the business still reported losses. Eventually Intel called it a day in 2006, selling the entire communications unit to Marvell Technology for around $600m.

A separate unit, the New Business Group, launched a range of other products in early 2000, including DSL modems, PC cameras and toys, but the project was later phased out in the light of poor returns. Its remaining activities, web hosting services for corporate customers, were phased out in 2003. See full profile for current activities

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