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October 12, 1999

Intel Predicts 100% Sales Over Web by Next Year

By CBR Staff Writer

By Siobhan Kennedy in Orlando

Looking to cash in on the growth of e-commerce, Craig Barrett, Intel’s chairman and CEO said yesterday that he wants 100% of his company’s revenues to come from on-line sales within the year. At the moment, the chip giant is making $1bn a month from web site sales, more than a quarter of annual total revenues, but Barrett said he expects that to increase as more and more companies and suppliers shift to making their IT purchases on line.

Speaking during a question and answer session at the Gartner Group Symposium/ITxpo yesterday, Barrett said it was a three horse race between itself, Cisco and Dell as to which would convert 100% of revenues to e-commerce first. He said the main challenge preventing Intel from achieving its goal wasn’t persuading its customers to embrace e-commerce, rather the difficult part would be making all our vendors go the same way. He said the challenges of integration, to ensure a single purchasing system, open collaborative buying environment and so on would be the biggest challenge for Intel going forward.

Likewise, when asked what his advice on e-business would be for IT managers, Barrett echoed those sentiments: You really need to look at the complexity of outsiders coming in and insiders going out. Put in absolutely scalable, manageable systems which meet the needs of your business partners, not just your internal enterprise, he said. We’re all going to have to adapt to this on the fly and the decisions you make today may come back and bite you in two years time so think carefully and take all your partners into consideration.

The fact that Barrett pointed to application integration as being a major challenge for Intel’s business is significant, especially given that the issue is one of the main themes of the conference so far. Speaking during his keynote presentation yesterday, Gartner’s CEO told the audience that the only firms that will succeed in e-business would be the ones who have successfully integrated their back office legacy systems with the new breed of web-enabled applications. And that message has been reiterated throughout the many sessions here over the last few days.

Getting its own e-commerce house straight is part of Intel’s strategy to become an integral part of the internet economy, Barrett said. Under the scenario, Intel will provide what Barrett called all the necessary building blocks not just on the client side, but on the server, networking and services and support sides too. He said deals like the one announced this week with Nokia for joint development of set-top boxes was evidence of this.

In addition to ongoing chip development, Barrett pointed to Intel’s efforts in the ASP space as evidence that the vendor is taking the net seriously. We have a lot of experience internally by doing it ourselves with, he said. We know how to run big facilities. Barrett said that he expects to see Intel’s ASP initiative become a $1bn business within the next couple of years. But he added: Even in those terms it’s still a very small part of our business. He said the chip vendor would compete strongly with the likes of IBM and Exodus and many of the telecoms carriers in this space.

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At one point during the session, Gartner analyst David Smith, quizzed the CEO about the chip giant’s relationship with Microsoft Corp. The analyst said that while the two were once as thick as thieves, they now appeared to be drifting apart, especially with next year’s launch of Intel’s IA-64bit chip, Itanium. Likewise, Microsoft’s NT strategy doesn’t seem so dependent on Intel, Smith said, a point which Barrett fiercely denied. I think the relationship between Microsoft and Intel is excellent, he said, just look at the number of presentations demonstrating 64-bit processing power with NT.

However, Barrett admitted that he thought the introduction of IA- 64, coupled with the rise of Linux in the enterprise space, would enable Intel to better compete in the Unix arena. IA 64 is moving to the last bastion of the RISC based proprietary architectures, he said. All those versions of Unix tailored to RISC are now looking to port their Unix onto IA64.

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