Intel VP Defends Decision To Kill PC Motherboards

With a plea to system builder partners to not "freak out," Intel Vice President and General Manager of the Reseller Organization Steve Dallman Wednesday defended the company's decision to kill its PC motherboard operation after 20 years in the business.

Dallman told CRN in an exclusive interview that the three-year plan to shut down the PC motherboard business is part of an Intel initiative to actually step up the pace of innovation in the desktop PC market. He said the changes will ultimately result in innovative touch and voice command technology being brought to market faster on desktop systems, opening the door to new opportunities and form factors for system builders.

"Don't freak out," pleaded Dallman. "This isn't the end of anything. If you can get people to read the entire announcement, the emphasis is on the importance of the desktop. It is one of our top money-makers. We are taking resources and redeploying them. We are going to be putting a lot of money into new all-in-one [desktop] technology reducing the cost of touch [technology on desktop systems] and bringing new perceptual computing and voice commands to the desktop."

[Related: Intel PC Business Down, Data Center Up In Q4 ]

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The PC innovation offensive is aimed at getting Intel out of the stale "gray square box" PC business, said Dallman. "At some point in time if that didn't change, if new, exciting formats weren't developed and brought to market, that part of the business would die," he said. "What we are trying to do now is take the resources that we have and use them to develop new innovative products for desktops."

Intel is using a three-year phase down of the PC motherboard business to make sure that system builder partners have time to plan and make adjustments to their business, said Dallman.

Intel will deliver PC motherboards for its next-generation Haswell chips, slated to ship later this year, he said.

"Everything is business as usual for this year," he said. "We are still going to build a board for Haswell, which will come out in the middle part of the year. That's going to be a great part. We are going to build that and support that just like we always have. There is actually a whole lot of time for everything to get adjusted and understood." Haswell-based board products will continue to be sold under existing system builder warranties with delivery continuing for the normal life of the product, which is usually 18 months, according to the company.

The first processor generation that Intel will not actually build a motherboard for will be the Broadwell chip that is slated to be shipped in 2014, said Dallman.

Intel disclosed the decision to kill the motherboard business just one week after the company reported that its earnings in the most recent quarter were down 26 percent to $2.5 billion. What's more, Intel said that its PC client business was down six percent in the quarter.

Intel’s decision to exit the PC motherboard business will not affect its server mothboard business. In fact, Intel said it will continue manufacturing of server motherboards out of its Enterprise Platforms and Services division (EPSD).

NEXT: Intel Plans To Begin Slowly Ramping Down PC Motherboard Business

In a statement provided to CRN, Intel said it had disclosed internally that its desktop motherboard business will "begin slowly ramping down over the course of the next three years." Intel would not disclose the annual sales or number of employees in the motherboard division.

"The internal talent and experience of 20 years in the boards business (which until recently has been largely focused on desktop tower type designs) is being redistributed to address emerging form factors -- desktop and mobile -- and to expand Intel's Form Factor Reference Design (FFRD) work and enable our partners to develop exciting new computing solutions," said Intel in a statement sent to CRN.

Glen Coffield, president of Smart Guys Computers, a Lake Mary, Fla.-based system builder and computer retailer that has sold Intel-branded systems as a white box provider for 20 years, said the Intel decision to kill its motherboard unit hit him like a "brick."

"This could be a game-ender for my Intel build-your-own-systems business," he said. "I have used Intel boards for all my systems, repairs, upgrades. This is devastating to me. I would just like to stand up in front of whoever made this decision and tell them they just destroyed the Intel system builder business model. The Intel system builder business is self destructing. These guys think that PCs are being turned into toasters and yet there are few guys left like me to build and support Intel systems."

Coffield said his Intel system builder business peaked at about 10,000 systems a year about a decade ago and is now down to about 1,200 systems per year. "I feel like a cockroach after a nuclear war," he said. "There is nothing left."

As a result of the Intel motherboard decision, Coffield said he is re-evaluating his system builder business model and will look at Intel rival AMD as a possible alternative. The biggest damage with Intel exiting the business, said Coffield, is he will no longer be able to get overnight warranty replacement on Intel boards. The problem, he said, is other board vendors do not have those robust system builder overnight replacement conditions. That will send the cost of supporting those Intel systems sky high, said Coffield.

Intel's Dallman, for his part, said Intel will work on making sure that other board makers have robust warranty terms and support for system builders. In fact, he said, he is planning on meeting with executives from motherboard makers Asus and Gigabyte this weekend to discuss the matter. "We have a year to work this out," he said. "This [overnight warranty terms and conditions issue] is one of the things I am going to talk to them about. Other motherboard makers will step up."