Intel Shifts To Web Strategy
Intel Corp. is quietly changing its business model to derive up to 90 percent of its revenue from transactions conducted over the Internet within two years in another sign of the worldwide move to an Internet economy.
Intel, which dominates the market microprocessors that run online companies' Web servers, also has a larger agenda in coming months: Spur much more interest in consumer and business electronic commerce, which would help drive sales of its high-end Pentium microprocessors that make surfing the net easier.
From nearly nothing last June, Intel's revenue from electronic commerce transactions - largely business-to-business sales of its Pentium microprocessors and allied products - has soared to about $1 billion a month, senior vice president for sales and marketing Sean Maloney estimated last week at the Spring Internet World conference in Los Angeles.
At that rate, he noted, nearly half of the semiconductor company's 1998 revenue would have been derived from e-commerce.
"The overwhelming majority of Intel's business will come over the Web within two years," he told CBS.MarketWatch.com.
Intel's most valuable products are the powerful Pentium microprocessors it sells to computer manufacturers, who build the personal computers that are helping fuel the current U.S. economic boom.
By performing all aspects of its sales to customers over the Internet - from orders to invoicing - Intel hopes to cut administrative costs dramatically both for itself and its customers. That would help give Intel a competitive advantage against microprocessor competitors such as Advanced Micro Devices.
More fundamentally, however, Intel's move is part of its assessment that the entire U.S. economy is moving to a Web-based paradigm.
"Intel's strategy makes sense,'' said Kelly Henry, senior analyst for International Data Corp. "We as a technology industry would look pretty silly if we told consumers that we want consumers to buy everything over the Internet and then didn't do that ourselves.''
Indeed, IBM officials also said at the Internet World show that their e-commerce revenue is totaling about $1 billion a month.
Intel recently announced a partnership with web portal Excite that will explore ways to spur e-commerce. Maloney demonstrated one early fruit of their efforts at Internet World: Three-dimensional "carousels" of Web pages allow users to efficiently scan sites by subject area.
Written By Michael Stroud, CBS MarketWatch