said Wednesday that it's consolidating two of its three chip lines -- the wireless and communications infrastructure businesses -- into one new division, to be called the communications group. Though the chip giant said it made the move for strategic reasons, the change may also reflect the slow takeoff of Intel's wireless business.
The combined communications group will be led by Sean Maloney, head of Intel's former stand-alone communications chip line. Ron Smith, senior vice president and head of the former wireless unit, will retire early next year, Intel said.
Intel's other line of business, the powerhouse microprocessor line that supplies more than 80% of its total sales, won't be affected by the changes.
CEO Craig Barrett said the move will help Intel improve its product planning and customer focus. "We continue to drive the convergence of computing and communications through our product lineup, and with this we see wireless local area networking and wide area cellular technologies coming together," he said.
At Lehman, analyst Dan Niles largely shrugged off the change in structure. "I don't view this as any big deal. The stock's not doing a whole lot of anything," he said. His firm hasn't recently banked for Intel.
In midday trading, Intel shares were virtually unchanged, off a penny, or 0.03%, to $30.24.
The market already has digested a number of disappointments in Intel's wireless business. The vast majority of Intel's wireless sales came from flash memory, but executives have acknowledged that the company tripped up and alienated customers by hiking prices for flash early in 2003.
Earlier this month, Intel said that on a long-term basis, it has revised down expectations for its wireless unit. It also said it would
take a charge of $600 million in the fourth quarter because of weaker-than-expected results in its wireless arm.
"When you talk to the company, they seem more positive and upbeat on communications than on wireless right now," said Bill Gorman, vice president in the equity research group of PNC Advisors. "They've probably done more to downsize and lower the break-even point in communications than they had in wireless communications."
In wireless flash, "Intel stumbled and lost share in a year that the market has recovered. They haven't gotten traction yet with their baseband processor," Gorman observed. "Though they have been doing well in the PDA market, they need to take Xscale
Intel's application processor and get further penetration in handsets, and that hasn't happened yet."
Still, PNC has been happy with its investment in Intel, which ranks as one of its larger tech holdings.
Intel shares have slipped 11.1% since Dec. 1, but the stock was still up 94.3% year to date, on the basis of Tuesday's close of $30.25.