Intel Not Inside

Intel (INTC) stock has performed abysmally over the past five years.

Intel, one of the most dominant companies in 20th-century Silicon Valley, has not adapted to market changes: [bold added]

Following one of Intel’s worst quarterly earnings, corporIate technology chiefs are left questioning the long-term future of the chip maker, which has struggled to execute on a promised turnaround. But they aren’t letting go of its PCs and servers.

On Thursday, Intel reported a loss of $1.6 billion for the second quarter, compared with a $1.5 billion profit a year earlier, and projected revenue 10% below Wall Street’s consensus and gross margins 25% below expectations, according to FactSet data.

The company also plans to lay off about 15,000 people, most by the end of this year, and pause dividend payments in a cost-saving drive three years into Chief Executive Pat Gelsinger’s turnaround effort.

For chief information officers, the results are the latest sign Intel has struggled the most of the other tech giants—Cisco, Microsoft and Dell—that dominated the dot-com era. And without a clear foothold in the all-important artificial-intelligence chip market led by Nvidia, Intel may not be a company to bet on in the future.

Intel was largely shut out of the mobile phone business because it focused on developing the x86 architecture used in PC's; it missed the market's desire for power-efficient chips that would extend battery life. And it's not even considered a player in artificial intelligence. However, it still has some core strengths that keep most customers coming back:

Meanwhile, corporations are still buying from Intel, which continues to dominate market share for non-AI computing workloads on servers. Second-quarter sales fell 1% from the same period a year earlier.

Intel has an advantage over rivals because it owns its chip fabrication plants, [Graphic Packaging CIO Vish] Narendra said. “They have a chance to recover some ground,” he added, “but that’s going to take some years.”

There's also Intel's history of reliability:

[Citi analyst Christopher] Danely said that despite Intel’s chips being outpaced from a performance perspective, they still have strong security and stability, making them appealing for the enterprise. Plus, changing suppliers isn’t always an easy or cheap option.

The stock market has a strong emotional component, and I don't think INTC has bottomed out. However, it is possible for Silicon Valley companies to rise to even greater heights after becoming nearly insolvent, Apple, Tesla, and Nvidia being among the most notable examples.

I'll likely pick up some INTC shares in the next 12 months.

Gordon Moore

Leaders of Intel in 1978:  Andy Grove,
Robert Noyce, and Gordon Moore (Chron)

He was the last of the founding fathers of Silicon Valley. Gordon Moore died at the age of 94. He achieved renown for starting Intel, but in the popular consciousness he became famous as the author of Moore's Law: [bold added]

A native San Franciscan, Moore wrote an article for the April 19, 1965, edition of Electronics magazine describing how the number of transistors that could be placed on an integrated circuit had been doubling every two years. His observation that the trend would continue became known as “Moore’s Law.”

Forecasters are lauded if their predictions pan out in the near-term; Moore's Law, to even Gordon Moore's astonishment, has held for over 50 years.

Consumers counted on its continued applicability; if they could live with their computers, television, telephone, etc. for the time being, they knew that a better and cheaper model was coming out next year.

Gordon Moore was a key member of the first generation of tech leaders who brought incalculable riches to the world. R.I.P.

Resentment Resurfaces

Now that I'm semi-retired I haven't needed to upgrade Microsoft's Office suite (Excel, Word, Powerpoint) for 12 years.

The 2008 features were sufficient for any tasks that I might undertake; besides, the data flow, logic, and organization of a project are far more important to its success than technical bells and whistles.

Earlier this month I upgraded MacOS, and old Excel wouldn't run some self-developed tax spreadsheets. Now was the time to unwrap the box of Office 365 that I got for Christmas several years ago and thought I never needed. (There are alternatives to Microsoft, by the way; Google and Apple both have competing free products that can work with Office documents.)

Memories of the Microsoft/Intel software/hardware treadmill resurfaced (the new version of the software won't work on the old chip and vice versa). In a year's time Microsoft will bill me $69.99 to renew Office, and I'll pay them because it's not worth the hassle to switch.

They know my weaknesses so well, and I resent them for it.

Naming the Players

A contest easier to understand and more quickly resolved

Economist Tyler Cowen opined (see yesterday's comment) that Washington, DC, and the San Francisco Bay Area are "power centers" on a collision course. This is an example of the "coming clash of the titans" (CCOT) type of prediction.

One sees the CCOT most commonly in sports; for example, Las Vegas bookmakers favor the Houston Astros to meet the New York Yankees in the 2018 World Series, though neither team, at 5-1 odds, can be considered a heavy favorite. A better sports example is professional basketball, where most experts thought a fourth straight championship match-up between the Golden State Warriors and the Cleveland Cavaliers was inevitable; both teams have performed worse than expected this year, and a Warriors-Cavaliers Finals is far from assured.

In the business world your humble blogger recalls 1970's newspaper and magazine features about the looming battle between AT&T and IBM, as communications and computers began to converge. Both companies were so dominant in their respective fields that the Justice Department pursued antitrust actions against both. AT&T was broken up in 1982, and IBM, which introduced the PC in 1981, lost control of its invention to Microsoft and Intel. Today Microsoft and Intel are each more valuable than AT&T or IBM, and the clash of the 1970s-tech titans never occurred.

In 1835 Alexis de Tocqueville foresaw that Russia and the United States would battle for world supremacy.

Their starting-point is different, and their courses are not the same; yet each of them seems marked out by the will of Heaven to sway the destinies of half the globe.

For half a century de Tocqueville's prediction was spectacularly true, though today the principal rivalry seems to be between America and China.

Picking #1 is hard enough, picking both #1 and #2 is tougher.

Plan B Becomes Plan A

Replacing the battery didn't work, so the problem had to be a broken connection. I pried open the 2008 MacBook to see if there was a possibility for an amateur to perform a zero-cost fix; there wasn't.

The ancient white MacBook, one of the first with an Intel processor, still had its uses. It runs ran equally ancient personal-finance software, and it was never connected to the Internet for security reasons.

I pulled out the hard disk (bottom right in the illustration and, yes, we had it backed up) and put the screws and cover back. The MacBook will go to the recycling center, and we'll destroy the hard disk.

As for our personal-finance software, it still operates on the 2004 pre-Intel iMac G5. Plan B, as often happens, becomes Plan A.