Q&A: Intel CEO Otellini Talks Up The Channel

Intel President and CEO Paul Otellini discussed the chip giant's plans for the Verified By Intel (VBI) initiative, vPro, Centrino and other technologies and channel programs in an interview with CRN Senior Writer Paula Rooney at the Intel Solutions Summit in San Diego. Earlier, Otellini gave a private keynote to more than 370 Intel Premier partners attending the annual event.

CRN: What was your overall message to the 370 Intel Premier partners and system builders that attended Intel's Solutions Summit on Monday?

Otellini: The channel in particular is doing a spectacular job ramping our most advanced microprocessor, Core 2 Duo, and in North America even faster than the worldwide channel and in both cases faster than multinationals.

CRN: Why is this?

Otellini: We made product available to them day one from a processor and motherboard standpoint. They know their customer bases and are not worried about the lowest cost product. They did very well on servers, which again was a major product refresh for us but we're also doing a lot of work with validation and preconfiguration. We're announcing today a program with Red Hat where we can do product and validate for every server. That takes part of the hassle out of the channel.

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CRN: Intel has done this before, right?

Otellini: We did it with Microsoft, but this is the first time with Linux.

CRN: Has Intel demonstrated the forthcoming Santa Rosa Centrino Duo platform? New products coming out of Intel's new 45 nanometer manufacturing process?

Otellini: Santa Rosa is not [from Intel's] 45 nanometer manufacturing process. It's just a new motherboard platform for the notebook that takes the notebook to the leading edge of graphics and I/O platform that the desktop has had for a quarter or two based on the same "Merome" Core 2 microprocessor. See CRN Online

CRN: And the 45 nanometer process ...

Otellini: On 45 nanometer, the first use is in microprocessors. We talked about five [of these forthcoming processors] and now have six operating systems running on it. I showed a notebook dual core, desktop dual and quad core and DP server dual and quad core.

CRN: When will these new processors be shipping?

Otellini: In the second half of this year.

CRN: Why is this transition to 45nm so significant for Intel?

Otellini: Every generation of silicon is important because it's better on the price and performance curve. This generation we think is a bigger leap than prior generations. Moore said it's the biggest advancement in 40 years. Why? Three things: We were able to start with the existing lithography and others are doing it with immersion or continuous flow of water, and that increases cost. We avoided that. And second, we changed the material inside, employing halfnium, an obscure element in the periodic table that allows us to do a middle layer and Hi K Dielectric and Metal Gate, which gives an industry breakthough with minimal leakage of power.

NEXT: AMD's quad-core claims CRN: AMD said it is coming out mid-year with a quad core they say will blow the socks off Intel's quad core. AMD said it will offer at least a 40 percent improvement over what Intel has. Intel's response?

Otellini: We haven't seen them yet. No one has seen them yet. There have been no public demonstrations or benchmarks.

CRN: But if that estimate is true?

Otellini: They're on our prior technology, 65 nanometer. We have a smaller die, higher performance and better power efficiency.

CRN: Does Intel expect to stay there for the next 12 to 18 months.

Otellini: Yes.

CRN: Without a doubt?

Otellini: Yes.

CRN: AMD as of late has had some inventory problems and ceded market share to Intel. To what extent has Intel capitalized on this opportunity?

Otellini: We have a 30 year commitment to the channel and I showed [at Intel Solutions Summit on Monday] 10 years worth of data about the percentage of microprocessors shipped to multinationals and local OEMs. In 10 years, it's statistically flat. About one third plus or minus 5 percent go to the channel day in and day out for a decade. We have had a three-decade long commitment to the channel, and we know when we have leading edge technology we win, and when the channel has access to leading edge technology, they win.

CRN: How is Intel looking to expand channel growth?

Otellini: At the same time, Intel is implementing a number of program to help channel efficiency. We talked about Red Hat, for one, and we have much better systems now to respond to requests within 24 hours around the world for 180,000 partners worldwide, and [we have] a tactical improvement to deliver an answer on the upside if the customer is out of stock on something or needs a products or there's a price change. We can respond very quickly to that. The bigger one is the motherboard, which is ramping to the channel's needs in flavors and volume.

CRN: AMD is coming out with a combined AMD-ATI chip dubbed "Fusion" that combines the CPU and GPU in one piece of silicon. How will Intel respond?

Otellini: I don't think it's appropriate for me to tell my competition where I'm going that far in advance, but integration of graphics and microprocessors and the move to, ultimately, system-on-a-chip is inevitable for big parts of the market -- not for all, but for a part of the market. It's not rocket science. It's the inevitable result of Moore's law. The whole nature of the integrated circuit by definition is you innovate and integrate.

CRN: So Intel will have something similar [to Fusion] in the next 12 months?

Otellini: I'm not giving any dates. Sorry.

NEXT: Is Windows Vista driving sales? CRN: To what extent has the release of Microsoft's Windows Vista improved demand for your chips?

Otellini: We haven't seen a change. Nor did we see a slowdown in the fourth quarter and early January. I think the deployment of Vista is very important and it's important to have this out. This will be like Windows XP: rapid adoption in consumer because you buy the machine and get Vista, and corporations have their own implementation plans.

CRN: Were your surprised there wasn't a bigger bump in business in the first quarter?

Otellini: Everyone knew Vista was coming. It wasn't a secret.

CRN: But are you getting feedback from customers that they are disappointed?

Otellini: I haven't heard, but its way too soon to tell. It takes awhile to get beyond early adopters and into mainstream. Intel is an early adopter and our deployment probably starts with the release of the first service pack, which I think is in November or in the fourth quarter sometime. We're waiting for that.

CRN: Intel's initiatives for channel partners -- Verified by Intel (VBI) and vPro -- are hot and gaining attention. But partners have had a tough time competing in the whitebook space for several years and continue to have a tough time. Is there anything coming down the pike with VBI to help partners compete, and do you think they will ever be able to truly compete?

Otellini: Yes and yes. VBI and the common building block program is a slow growing one but very consistent. We are bringing on a new aggregator to help improve logistics and time to market on this thing.

CRN: Which company is that?

Otellini: I'm not at liberty to tell you.

CRN: What will be the end result of having a new or multiple aggregators?

Otellini: Faster time to market and hopefully lowered costs. At the same time, we know the vast majority of our channel customers also sell branded notebooks, and they do that because they have to hold their customers. We have changed our internal Intel sales incentive plan so there's no longer a disincentive for our channel sales guy to have a branded box or notebook sold versus a whitebook sold. It's no longer a disincentive, and that's good for everybody involved. The key is to engage customer by customer and find our what they want -- if their strategy is to build their own, or resell HP or Dell.

CRN: And vPro?

Otellini: Things like vPro, which cut across both white and branded [PCs], are very critical to the success of the channel because it addresses a critical profit center for these guys, which is managed services. Many or most of them sell managed service today and may have managed services as their largest profit center, so being able to deliver a new platform that address it is critical to them.

CRN: How significant will the next vPro platform, code named "Weybridge," be to partners?

Otellini: It's a significant improvement. It takes a technology that used to be known as "LaGrande," needed operating system changes and virtual machine capabilities, and brings it up so now you have truly trusted partitions. If you're an IT shop and let employees have their own applications in their workspace, and it gets a virus or something, it doesn't screw up the whole network. And you can do load balancing if you're running multiple operating environments. Not every Windows XP application runs on Vista. So how do you do it? Through partitions.

CRN: In terms of vPro, how will Intel market this to channel partners and add value. What incentives will there be?

Otellini: The incentive for them is natural. It's a slightly higher priced platform in the low double digits dollars, but the capability it enables is to sell more managed services. We are validating a number of software services for that, and we're trying to work on scenarios so we can help broker access to the software service for people working directly with the channel, people like Symantec or OpenView.

CRN: With respect to VBI, how do you measure, or quantify, success?

Otellini: Whether customers are happy or not. They could be happier so we continue to work on the program.

CRN: What is the big challenge going forward?

Otellini: Cost. Part of it is time and place utility, which is logistics. That'll get much better, but part of it is making sure we have sufficient aggregation such that [whitebook builders] are not disadvantaged in terms of cost. It's not Intel pricing per se. It's the cost of components, power supplies, displays, things like that.

NEXT: AMD's antitrust suit CRN: What's the status of the antitrust case AMD has brought against Intel?

Otellini: There were some actions last week and some narrowing of the case where the judge has thrown out much of international aspects of the case. It doesn't go to trial until mid-2009, so it's not something [imminent]. The executives are not in final prep mode.

CRN: But how will Intel defend itself against the charges?

Otellini: [AMD] has to demonstrate that they are true. We'll demonstrate they're not true.

CRN: How will Intel argue this?

Otellini: [pauses] I'm not getting into this. Good try.

CRN: In general, how important are channel partners to Intel these days?

Otellini: Critical. We can't grow if they don't grow.

CRN: Where do you see big opportunities for the channel over the next year in North America?

Otellini: Servers and vPro are right smack down the center of their market. I showed them data on server deployment and told them less than 5 percent of servers that need to be installed by 2010 have been installed. There's a huge server opportunity. I think vPro is a big deal for them and we'll continue working on notebooks for channel partners.

CRN: Do see any evidence that virtualization has slowed server sales?

Otellini: No. We support the server consolidation stuff but the projected growth of servers assumes there's some degree of server consolidation. Virtualization is a necessity to deliver the capacity people need so we're not worried about cannibalism. We're worried about deploying the new technologies that make people more efficient.

CRN: Do you expect to see any Linux desktop growth in the next year?

Otellini: There's some. There's obviously some stuff I've read that [some large companies] have switched, but I don't know how real those are. It's an interesting development to watch.