Intel’s in deep doo-doo.

Call it a hunch, but I think Intel’s in trouble. Deep trouble. Why? Well look at the events of the past 6 months. I’ll list them, as I perceive them:

Intel’s Celeron, with it’s full speed level 2 cache, performs better than they expected, equaling the Pentium II on just about every test. This takes away from PII sales, so Intel launches a major PR campaign to accompany the introduction of the P3. The P3 is not much more than a P2 with SIMD instructions (read: the way MMX SHOULD have been done the first time around). The long and the short of it that consumers don’t want to spend money on instructions that they can’t understand, that are only supported by one filter in Photoshop 5.0, and that don’t have any demonstrable effect on the user’s experience. Consumers want e-mail, they want a green plastic shell on their computer, and they want a computer that will run “Barney’s Purple Fun in 3-D Teletubby Land” so little Mikey will shut the fuck up. So Intel blows money on ads, but doesn’t sell many P3′s.
• Intel’s i740 graphics chip bombs.
• AMD not only announces the August release of the K7, they post results AND set a concrete pricing scheme. Pricing pressure on Intel increases, squeezing even less profit from the P3 line.
• Taiwanese mother board make VIA supports PC133, a memory standard that is direct competition with Intel’s favored Rambus DRAM (RDRAM) line. On top of this, RDRAM is facing production problems, forcing Intel to swallow it’s pride and reconsider supporting PC133. Why? The K7 will have a 200 MHz bus, and if Intel hopes to even stay close, they need to remove every existing bottleneck from their systems.
• Intel announces the cancellation of the high-end i754 graphics card, and announce it will stop supporting the i740 cards (see item 2). The average observer may not read much into this, but hell, it’s my job. Why, you say, would Intel want to stay in a highly competitive field with low profit margins where they don’t have the best technology? You must understand, Intel’s goal with their i740 foray into graphics was not to make money, nor was it to provide the customer with a solid card at a low price point, nor do I think they even intended to produce a decent video card. Intel’s goal is to manufacture every chip in your computer, or, to have every function in your computer be handled by a CPU and a graphics co-processor. Why didn’t it work? Graphics are one the few things that even a computer-ignorant person can judge. Give a consumer a computer that costs $100 more and has prettier effects, a smoother frame rate, and is pushing more polygons, and they’ll buy it, every time. But I’m willing to bet that Intel would have kept pumping money into graphics if it weren’t for the K7. Intel knows it’s in for a fight, and it’s trimming the fat in preparation.

So why does all of this spell defeat for Intel and not for the K7? If the K7 is released in early August as promised, then it has 4 solid months to build up an installed base before the holiday season. That’s when all of Mikey’s favorite sotware will be released. If the K7 really does hold a performance edge, then word will get around that “Barney’s Purple Fun in 3-D Teletubby Land” runs better on an AMD chip. Will Intel go bankrupt? No. Will they be unprofitable? Probably not. But they will be in a highly competitive situation in the processor market, and they’ve never faced that before. And that spells trouble.