Intel Gets Inside the Channel

VARBusiness industry editor Rich Cirillo caught up with Otellini just as he stepped off the stage to get his take on Intel's channel strategies and the areas for opportunity. Here's what he had to say:

VB: In your new role, has your message to the channel changed?
Otellini: As Intel builds a broader range of products for clients and servers and the products that connect them, we are essentially building the infrastructure for the build-out of Internet-based business. I think increasingly the channel's customers,many of them small businesses,will continue to need the services capability. So my message to them is: Embrace the entire product line, use the programs we've developed to skill up to sell a more sophisticated and a broader range of products and services, and ride the wave.

VB: In meeting with partners, what are you hearing as their concerns in 2002?
Otellini: They're saying, "Tell me it's going to be OK," and asking, "Is business recovering? Where is the opportunity for us?" We reassure them we are betting $13 billion of capacity in two years. That's the

single most visible bet on the future anyone in the industry is making. Then we'll put another $4 billion or so into R and D this year to build products. We believe very much that you never get out of recessions or downturns with old products.

VB: Where do you have the best traction? Do you see any areas where you need to step up activities and relationships?
Otellini: That's a tough one. I think servers are still the big opportunities. There's more money and more margin there. It's where the business is going. To the extent [solution providers can learn to sell the servers and the networking stuff, they have an opportunity for an ongoing services stream. They might be able to help broker services into it like broadband-supply agreements or application agreements. If you look at the model of the ones that are doing very well right now, they are moving toward low-cost and toward high-touch in terms of service.

VB: What's your view of the system-builder market,especially the white-box guys? How are they doing?
Otellini: The distribution portion of our business, which serves the white-box part of the channel, has been about a third of our business. It's been that way forever, and I don't see that changing.

VB: What impact, if any, will HP-Compaq have on that space?
Otellini: The thing that's indicative is that you're seeing the No. 2 and No. 3 players recognize the need to have this bi-modal capability of high-touch and low-cost. They want scale for lower cost, and they want capability in terms of being able to provide consulting services. It's a very strong message to the channel that this is something they need to emulate.

VB: You've had recent announcements about partnerships in a number of technology areas. Which ones are most important to your overall strategy?
Otellini: Some of the things we are excited about recently are the strong set of announcements with Intel and Oracle around the 9i rack for clustering. That's built around our Zeon architecture. And we announced with BEA in terms of optimizing WebLogic for Intel. That was basically a Sun house. So you start to see very strong footprints in the sand in terms of enterprise-class services and applications.

VB: What about AMD's inroads to the channel?
Otellini: We wish them the best of luck.