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Slide 1

Intel logo

Creating Platforms and Ecosystem

Presentation of Jeffrey P. McCrea
Vice President, Intel Corporation
Federal Trade Commission/Department of
Justice Hearings on Single-Firm Conduct
October 26, 2006

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Slide 2

The Upgrade Dilemma

  • To grow sales in mature PC markets, Intel needs to create incentives for consumers to upgrade

    • Shorter upgrade cycle means more microprocessor sales

  • Getting customers to upgrade more often requires development of new usage models that increase the benefits of ownership

    • Customers will upgrade to get a highly desirable capability that their current system does not have

  • Developing complementary technologies that enable new usage models has been a longstanding Intel strategy for driving new microprocessor sales

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Slide 3

Case Study: Centrino® mobile technolog y

  • Centrino mobile technology (CMT) is a case study in the development of a platform of complementary products to drive a new mobility usage model

  • CMT includes an Intel microprocessor, an Intel chipset, and an Intel wireless networking card

  • Intended to create demand pull for mobile processors and increase sales of higher valued processors

  • CMT delivered a new usage model – Thin and light notebook PCs with high performance, long battery life, and the ability to connect wirelessly

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Slide 4

Why a Platform

  • Platform approach is necessary to deliver all vectors of new usage model of mobile computing with wireless connectivity

    • Microprocessor with desktop-like performance and long-battery life, power-optimized chipset, and wireless connectivity to enable mobility usage model

  • Platform ensures that ingredients work with each other and connect with “validated” routers and access points

    • Millions spent on validation and interoperability testing to ensure ease of use

  • Platform branding was required to effectively communicate the platform promise

    • Platform brand delivers a crisp consumer message: To get unwired, look for Centrino mobile technology

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Slide 5

What Platform Delivers

Drawing of labelled squares by category and what each category delivers

[D]

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Slide 6

The Need to Build an Ecosyste m

  • To succeed with the wireless computing message, Intel had to create an ecosystem of wireless hotspots in airports, hotels, and retail establishments

    • Hotspots may be pervasive today, but weren’t common before CMT

  • Consumer value proposition was much stronger if wireless connectivity became commonplace

    • Large Intel investment to enable hotspot partners

  • Platform branding helped to create the ecosystem by demonstrating to hotspot partners that Intel would promote wireless capability to new users

    • Helped create a revenue stream for service providers to recover infrastructure investment

    • Large advertising budget for CMT created demand and signaled commitment

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Slide 7

Challenges in Delivering a Platform

  • Would the platform make the new microprocessor a greater success or hold it back?

    • Intel had a revolutionary new microprocessor for the CMT platform (Pentium® M processor), but little experience in wireless communications

  • Do the technological challenges pose a risk to the strategy?

    • More challenging to deliver all three elements of the platform than to deliver any one alone

  • What brand should be emphasized?

    • Emphasis placed on the platform brand to avoid a mixed message, but this was a large bet on both wireless and the overall platform taking off

  • Will investments in creating the ecosystem pay off?

    • Large spending on hotspot enabling, co-marketing with ecosystem partners, interoperability spending, and advertising

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Slide 8

Resolving the Challenges

  • Decision: Benefits of mobility platform outweigh risks

    • Bet that mobility platform would be bigger seller than a good new notebook CPU alone

    • Bet that wireless group would deliver a good product on first try (and keep up with pace of innovation)

    • Bet that platform would succeed and lead to increase in sales of high-valued performance processors

  • Complex task to manage progress on engineering, ecosystem creation, brand development, marketing, and sales fronts to get ready for launch

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Slide 9

CMT Platform Gamble Paid Off

Photo of man looking thru a camera and woman working on a laptop sitting across the Bay Bridge in San Franciso

  • CMT turned out to be a phenomenal seller, providing strong uplift to microprocessor sales

  • Wireless computing became ubiquitous in less than two years

  • “Centrino effect” lifted demand throughout industry

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