Partners: Intel Needs To Return Focus On 'Core Customer Base' With Future Acquisitions

Intel needs to drastically change its acquisition strategy to keep up with its core customer base – and its channel, according to partners interviewed by CRN.

The Santa Clara, Calif.-based company has been bolstering its acquisition strategy around new areas, such as autonomous vehicles, immersive sports technologies, and the Internet of Things – but channel partners wish Intel would instead focus on its core customer base.

Erik Stromquist, chief operating officer of CTL, a Portland, Ore.-based system builder and distributor of components to the channel, said Intel has had a "lousy track record" with its acquisitions over the last decade, and needs to focus on its core base.

[Related: Intel Drives Roadmap For Connected Cars With $15.3 Billion Mobileye Acquisition]

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"I'm concerned that Intel may neglect its core customer base that produces the majority of its profits," he said. "I think investors and core customers are equally concerned with [the] acquisition [of Mobileye]."

In 2016, Intel executed an array of acquisitions focused not on its primary business, the client compute group, but instead new technologies, most notably autonomous vehicles.

Most recently, the company last week announced plans to acquire connected car chip manufacturer Mobileye for $15.3 billion, a move that CEO Brian Krzanich said would help Intel accelerate its efforts around computer vision, localization and mapping, machine learning and artificial intelligence in the autonomous vehicle space.

The announcement is only the latest among of a plethora of Intel's acquisitions around connected cars; in 2016, Intel shelled out money for companies like computer vision manufacturer Movidius, automotive machine vision startup Itseez, and car safety tool company Yogitech.

Beyond autonomous vehicles, the company has also bolstered its strategy around immersive sports technology and IoT with acquisitions in 2016 of such companies as Recon Instruments, Replay Technologies, and Lantiq.

Martin Smekal, president and CEO of Torrance, Calif.-based Intel partner TabletKiosk, said he would like to see "similar-size investments in [Intel's] current core markets beyond the building of new fabs."

"I wasn’t excited by the acquisition of Mobileye as it pertains to channel business and helps to expand the markets we all can and do serve," he said. "As a channel partner I would prefer to see greater focus and depth placed on traditional channel business, such as healthcare, hospitality, security, finance, and manufacturing."

Intel's acquisitions in 2016 closely align with its new strategy, which Krzanich announced a year ago, to transform from a PC-centric company to one that can accelerate in the cloud and connected devices.

While Intel's strategy around the cloud is necessary, it's also important for the company to keep focus around its client computing group, which still makes up an overwhelming majority of the company's revenue.

While the PC market hasn't seen strong growth over the past year, Intel's client computing group still made up $32.9 billion of revenue in 2016, higher than its data center group, which brought in $17.2 billion in revenue, and its IoT group, with $2.6 billion in revenue.

Krzanich, for his part, has stressed that Intel's focus on cloud, connected devices, and autonomous vehicles stems from one thing – data.

"Many of you have asked why we think autonomous cars and vehicles are so important to Intel’s future. The answer is data," Krzanich told employees in an email after the company announced its plans to purchase Mobileye. "Our strategy is to make Intel the driving force of the data revolution across every technology and every industry. We are a DATA company. The businesses we focus on -- and deliver solutions to -- create, use and analyze massive amounts of data."

Dominic Daninger, vice president of engineering at Northern Computer Technologies, a Burnsville, Minn.-based custom system builder, thinks Intel is trying to make up for other areas it has missed in the past, such as the mobile market. "I think Intel learned a lesson from missing the smartphone mobile market so badly," he said. "They don't want to repeat a mistake like that. That was one of the reasons you have seen acquisitions like the recent acquisition and the move into [automated] vehicles also."

Despite channel concerns about Intel's acquisition record, Kent Tibbils, vice president of marketing at ASI, a Fremont, Calif.-based Intel system builder, said he hopes partners will see opportunities arise from the acquisitions in the long run.

"Intel certainly has been making a lot of investments in new market segments that in the short term may not have direct involvement for the channel, but over time, new technologies could be developed that have a direct value for the channel," he said. "As a key influencer in creating markets for their technology, Intel works closely with their vast array of partners to develop solutions and share expertise that will ultimately help resellers expand their businesses."