Creating Platforms And Ecosystem

Slide 1

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

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

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

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

Slide 5

What Platform Delivers

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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

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

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

Slide 9

CMT Platform Gamble Paid Off

• 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