Intel jobs cull could bankroll new initiatives

More moves in wireless and other sectors are possible

Intel’s decision to lay off about 10,500 employees will sharpen its focus on its processor business but could also help to bankroll new forays into complementary markets.

The chip giant expects to save about $3bn per year as a result of the job cuts and other restructuring. The moves, including the recent sale of Intel’s communications chip business to Marvell, will help to reduce the effects of diminished profit margins.

However, despite its recent problems, some watchers also expect Intel to explore other directions, despite a history of troubles breaking into sectors such as telecoms equipment, graphics chips, datacentre hosting and a 1990s e-commerce venture with SAP called Pandesic.

One direction that Intel is already taking is to make broad bets on wireless infrastructure. Intel already funds Pipex Wireless, a UK venture designed to help WiMax proliferate, and it backs similar projects in other territories.

“Intel's quite enamoured of WiMax, but, like Wi-Fi, this seems like something to make mobile computing more attractive rather than a big money-making opportunity on its own,” said Gordon Haff of analyst Illuminata.

Jim McGregor, principal analyst at In-Stat, said, “I would expect Intel to make acquisitions to do with WiMax but WiMax is not the only solution out there and there’s been a lot of pushback against a single standard.”

US investment pundit Jim Cramer has suggested that Intel could take over Broadcom, a company that has channels to market in wireless equipment that could help Intel achieve its aims.

However, In-Stat’s McGregor laughed off that prospect, noting that Intel and Broadcom have a history of conflict. He also played down suggestions that Intel could purchase graphics processing giant nVidia in a tit-for-tat counter to AMD’s recent acquisition agreement with ATI.

“Intel has the graphics expertise in-house and has done a phenomenal job in chipsets,” McGregor said. “I don’t think Intel has to go after nVidia or Broadcom.”

Illuminata’s Haff said, “Over time, greater integration is doubtless one of the paths that CPU makers will take the increasing transistor counts enabled by Moore's Law. Although Intel could make an acquisition to accelerate its graphics integration work, it's hardly a requirement that it does so.”

Intel Capital, the firm’s venture arm, also has investments in e-payment, entertainment, broadband and other companies.

However, going back to basics is likely to dominate Intel’s agenda for the foreseeable future. “Intel's priority has been and is to get its core microprocessor business back on track [and] anything else is secondary,” said Illuminata’s Haff.

In-Stat’s McGregor said Intel needs to continue to have a stake in networking futures as data networks edge out voice and, potentially, cellular links. “Intel is refocusing on core competency which is the silicon but they need to look for the next wave,” he added.

McGregor said Intel is also “really going to push x86 into the low-power market” in handheld devices.