Intel reorganizes communications group

Intel Corp. has decided to combine its communications businesses into a single unit, one week after expressing concern over the long-term growth prospects for that business.

The Wireless Communications and Computing Group (WCCG) will be folded into the Intel Communications Group (ICG), with the new organization run by existing ICG head Sean Maloney, executive vice-president and general manager, Intel said in a release Wednesday. The current head of WCCG, senior vice-president and general manager Ron Smith, will retire early next year, the company said.

WCCG is home to Intel’s XScale processors for personal digital assistants, its cell phone processors such as the PXA800F, and its flash memory division. The group has been hit hard over the past year by an ill-timed decision to raise flash memory prices in January that cost the company market share, and the slower-than-expected sales of next-generation cell phones with Intel processors.

Smith decided to retire on his own, an Intel spokesperson said. Smith is only 53, but is a 26-year veteran of the 35-year old company, making him “old in Intel years,” the spokesperson said. His retirement will take effect early next year, after the divisions are integrated as of Jan. 1, the spokesperson said.

Last week while providing an update for fourth-quarter revenue expectations, the Santa Clara, Calif., company said it plans to take a charge of about US$600 million related to a reduction in goodwill for assets related to the acquisition of a wireless company Intel made in 1999. The value of assets acquired from DSP Communications Inc., which became part of WCCG, has significantly decreased, and Intel no longer expects the business to grow as fast as it once thought, it said.

At the time, Intel chief financial officer Andy Bryant declined to answer questions about possible management changes within WCCG.

The PXA800F, formerly known as Manitoba, was one of the products that arose from the technology and engineers acquired from DSP Communications. It contains an applications processor, digital signal processor and flash memory on a single chip.

The chip was Intel’s first effort at cracking the cell phone chip market, which is dominated by Texas Instruments Inc. The worldwide market for cell phones has soared this year, but not enough cell phone manufacturers and carriers have chosen the PXA800F for their designs to help erase the WCCG’s losses.

The competition in the communications business is far more intense than in the world of PC processors, where Intel holds around 80 per cent of the market, said Will Strauss, principal analyst with Forward Concepts Co. in Tempe, Ariz.

“This shows they’ve finally realized that things aren’t just working the way they should in the wireless communications area,” Strauss said.

Cell phone companies have been reluctant to adopt Manitoba because of its design, Strauss said. While combining chips on a single die makes for an elegant design, it generally costs more to implement than a design with separate chips for the applications and digital signal processors, he said.

“It is an engineering marvel to be able to put the flash memory on the same die as your logic. But just because you can do it doesn’t mean it’s the right thing to do,” Strauss said. Manufacturers prefer to have the flexibility to choose parts from different suppliers based on cost and performance requirements, he said.

Intel has experimented with integrated chips before, most notably with Timna, a chip designed for budget PCs with an integrated graphics controller and memory controller, said Nathan Brookwood, principal analyst with Insight 64 in Saratoga, Calif. The company canceled the chip in 2000 after realizing that the integrated components would cost less for motherboard makers to purchase separately and assemble on their own, and the performance benefits of the integrated chip were not that impressive, he said.

The combined ICG group will add the WCCG products to its existing roster of networking processors, wireless chipsets and network cards, Intel said.

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