08:55 PM

Tech Watch: The secret barometer of Intel's health reveals...

...a slight downgrade.

I popped into the Intel Developer Forum (IDF) the other week at the Moscone center. The twice-yearly IDF is a good place to catch up with my Intel contacts and also rub shoulders with analysts and other hacks (Brit. slang for journalists in case you were wondering!).

...Over the years of attending IDF, I've noticed a reasonably close correlation between Intel's business performance and the quality of the backpacks that conference visitors receive. In lean times, the backpacks are flimsy and made from lower grade materials. About a year ago, the quality of the backpacks at IDF jumped dramatically. And for good reason, revenues were strong and growing faster than expectations. Intel was raising revenue forecasts, not cutting them.

The Spring 2004 IDF again produced a top quality backpack, black and electric blue, with good quality ballistic nylon, and stylish use of yellow trim. It was clear that Intel was expecting a good year.

At the Fall 2004 IDF, the conference backpack looked to be of comparable quality. Closer examination, however, showed that there was some downgrade in quality, but that it was minor. Conclusion? Slight downgrade to Intel's fortunes, but still betting on a solid business outlook for the next six months.

Joe Fay, US editor of Computerwire, agreed with my careful analysis but pointed out that the contents of the backpack indicated a rebounding small technology company sector. Indeed, the backpack contained a larger number of chotkis than before. In fact, mine to contain a double amount of pens, tiny measuring tapes, and other promotional items from companies exhibiting at the conference. Conclusion? Smaller PC tech companies are raking it in--a very bullish sign.

Even without the help of my backpack barometer, it's clear that Intel remains in a very strong competitive position. The trimming of revenue forecasts for the current quarter is modest. As for the changes in its microprocessor roadmap, I would expect Intel to make changes as the market changes.

There is no way that it can predict two years ahead, what the likely best combination of microprocessor technologies are likely to be. That's why it runs many microprocessor design teams. And it staggers those projects so that it can drop a design project, or accelerate a more promising design, as market demand changes.

This is cheap insurance for a $32.7bn revenue company. Until there is a clear hit on Intel's revenues, criticizing it for making necessary changes in its business strategy, as many recent articles have done, is a useless exercise.

UPDATE-Thursday September 23

Joe Fay is now reporting that there is a strange smell eminating from his IDF backpack. He has confirmed it with colleagues. I will check mine, but if true, I may have to revisit my slight downgrade of Intel.

IDF is also a good place to taste the mood of the PC industry and the mood within Intel. And on both counts, the mood was rather muted. That wasn't surprising given Intel's recent trimming of its 3rd quarter revenue forecast, and large changes in its microprocessor roadmap--not to mention Craig Barrett's reaming of his staff in a very public memo (BTW not a good idea Craig, it is always best to keep domestic quarrels private.)

But, I did get a chance to check on my favorite barometer of Intel's health...