The following article was contributed by Sam Bhavnani, senior mobile computing analyst at Current Analysis, a competitive market intelligence service in La Jolla, Calif.
Earlier this month, Intel officially shipped the first three processors utilizing the company's new numerical naming scheme. The new chips, codenamed "Dothan" are the first to be manufactured by Intel using the 90nm manufacturing process.
While the new chips feature slightly faster clock speeds and greater amount of cache in relation to its predecessors, the name change signifies the termination of Intel's history of teaching customers that "megahertz matters." Over the past few years, companies such as Apple and AMD have tried to undue the "megahertz myth" and by adopting its new naming convention, Intel has joined the fray. Dropping its "megahertz matters" concept, Intel must re-educate consumers, corporations and resellers on what is important when selecting a processor. In Intel's world, that's Dothan.
Intel Today -- An industry Perspective
Intel kicked off 2004 with an ambitious goal: to enable its Centrino platform to gain a foothold in the retail/consumer market. According to Current Analysis data, the platform is currently hovering around the 11% market share range within retail (week ending 05/01/04) and has not been above 14% all year.
The challenge Intel faces today is that the Centrino platform is based on the Pentium M processor, which has a lower megahertz rating than the Pentium 4 processor, but offers better performance and battery life.
Today, customers, largely because Intel educated them to do so, will select a 2.xGHz Celeron based system over a 1.xGhz Pentium M based system. Intel's new feature based processor number is designed to move customers away from solely focusing on the speed rating of the chip.
The situation is analogous to what is happening in baseball today. Many teams are adopting the philosophy of sabermetrics, taking into account overall performance over one or two key traditional stats. On-base percentage is becoming more important in baseball than homeruns or batting average and Intel's new marketing strategy is emulating the scouting philosophy of the Oakland A's in many ways.
This new naming convention is a wise move for Intel. Intel proved, through the low retail adoption rate of Centrino to date, that customers will not pay more money for a 1.x GHz product than a 2.x GHz product.
Intel's challenge to educate on Dothan, and persuade consumers to 'buy now' appears simple; Intel will need to focus its energies undoing its own "megahertz matters" concept. Explaining to corporations will not be as difficult as IT buyers tend to be more educated on computing platforms and performance, but the general layman walking into a retail store will not even begin to understand the difference. As an analyst, I believe Intel's marketing clout will enable a successful platform push to the consumer market. However, Centrino's retail share will likely stay under the 25% mark until 2005.
AMD also poses a big threat to Intel. AMD has been making inroads to the popular desktop replacement market with its 64-bit processor. While there are no applications that a consumer can run today that take advantage of the 64-bit capabilities, consumers love the fact that they are getting the most cutting edge technology. Intel does not have a 64-bit chip for notebooks at this time and let's face it, we live in an SUV culture where bigger is better, and consumers will reason that a 64-bit chip is twice as good as a 32-bit chip.
The name shift from Intel also places a huge additional burden on the major PC manufacturers. Now PC manufacturers not only need to explain to customers why its products are better than the competition in terms of features and service, but they also need to explain to the customer why beyond the clock speed, things like L2 cache and FSB are also important to understand.
A mind-shift must occur within the sales and marketing teams at manufacturers and resellers. The industry still thinks of Megahertz/Gigahertz.
Many involved closely with the notebook industry have literally printed out "cheat-sheets" on the new model numbers. And, when industry insiders refer to the Pentium M 755, they seem to always mention something along the line of "the 755 is the 2.0GHz chip."
For the remainder of 2004, the industry will be in a slight state of flux as people get used to the new naming strategy. As more and more models are released in the 7xx line and when models are launched in the 5xx and 3xx series, some of the initial confusion will ease.
In the end, Intel must use its marketing might, successful promotions and adopt a heavy handed consumer education program. Without it, Intel will find it increasingly more difficult to fend off the rising threat from AMD.