White-Box Fever: Intel Reaps Benefits Of Channel Strategy

"We are seeing a payoff for really what we've been doing the past seven years in terms of embracing and scaling the overall program engine to about 80,000 white-box integrators worldwide," said Tom Kilroy, vice president of sales and marketing and general manager of the vendor's reseller channel operation. He called the white-box strategy a "systematic, consistent, reliable, one-generation-ahead engagement with the channel."

"The channel is very central to Intel's strategy," he said. "The channel is driving our growth. It's not a quirk."

Kilroy spoke about Intel's channel plans a day after Intel President Paul Otellini discussed with analysts the company's third quarter, in which sales remained roughly flat at $6.5 billion, but its profit of 11 cents per share missed Wall Street expectations by 2 cents.

Despite the disappointing results, Otellini also said a key strength for the company remained its channel sales.

"Our worldwide distribution channel's sales-out tied record unit levels," Otellini said. "We expect channel growth to continue, and we are expanding our sales, marketing and branding initiatives in this channel."

Among other things, Intel has recently beefed up its "Intel Inside" program for the white-box channel. Specifically, it has expanded the potential avenues that solution providers have available to market their own products and service offerings using funds Intel provides for buying the vendor's products through authorized channels.

"We're going to scale the current engines we've got in place," Kilroy said. In addition, Intel will look to help partners build sales with programs for vertical markets and for the government and education space, he said.

"We want to strengthen the programs we've got in place to further enable the channel to win there [in government and education," Kilroy said.

Chuck Doran, sales manager at Infotel, Fletcher, Ohio, said that while business has remained stable and flat since September 2001, Intel has maintained a strong relationship with the white-box maker.

"They've been easily accessible and very helpful," Doran said. "We use [Intel as the primary platform for the systems we build,Intel motherboards as well as processors. They're the primary resource for any vertical markets."

Over the past year, Intel has reduced its head count by about 3,000, and Doran said that has had some affect on Infotel's relationship with the chip maker.

"The sales guy we had for nine years opted out for the package [Intel gave," Doran said. "They're going to have to re-establish some relationships."

Despite growing its profit on a year-over-year basis to 11 cents per share from 2 cents per share, the chip maker's stock price fell to below $14 per share from almost $17 per share prior to its earnings announcement.