An albatross or hidden gem?

Posted by: Cliff Edwards on June 27, 2006

Was Intel’s decision to sell its communications chip business to Marvell a good or bad one? From the look of way each company’s stock is behaving, a lot of people think Intel may have handed Marvell its albatross—and received a nice chunk of change to boot.

But are CEO Paul Otellini and crew throwing in the towel too soon? The company clearly needs to get back on track in its core business and regain momentum lost to rival Advanced Micro Devices. After all, there’s plenty of new business to mine in the next decade or two as India, China, Russia and Brazil continue their rapid development. The sales of cheap servers alone to fuel the growth of the Internet will keep Intel in clover for a long, long time.

Still, I can’t help but wonder if jettisoning the handheld part of its wireless business is a good thing. The growth and sheer number of “smart” cell phones already outstrips pc sales by a very wide margin,and cell phones are adding more functions almost by the minute.

Some might argue Intel can still make headway with handheld mini-pcs such as those touted by Microsoft with its Origami project and Intel itself. Yet, interest so far has been lukewarm at best because of the devices’ prohibitive price tags and functionality.

The wireless business is all about relationships, requiring a lot of time and patience to build them. After a half decade of such relationship-building that in its early days proceeded mainly in fits, with few starts, Intel has had some recent successes. Its chips are included in Palm’s Treo, Motorola’s Q and the popular recent Blackberry 8700.

Sure, if the pc and server business slows, Intel might have some nice fallbacks with Wi-Fi and WiMax. It also is likely to have the cash to jump back into the handheld fray if its so chooses. But it once more will have to start from scratch.

So does the short-term benefit achieve the best long-term goals for a company that eventually must extend its roots to remain a power player on the world scene?

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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