System Builders Ask Intel: Where Is Our Future?

As Intel pushes its chip business into new mobile, big data and wearable computing markets, system builders said they don’t want to be forgotten as they struggle with smaller margins on microprocessors and a graying PC market.

At this week’s Intel Solutions Summit 2014, which runs from Wednesday to Friday in Las Vegas, partners will hear from Intel's new channel chief Maurits Tichelman, along with key technology partners Gigabyte, Asus and Verizon, about where they hope to take the channel moving forward. Intel partners, approximately 60,000 in North America, face the challenges of a shrinking PC market, and a booming mobile market that has been hard to tap for revenue.

"The 'A' No. 1 thing partners want to hear is, how can the channel make money with Intel?’ said Todd Swank, senior director of product marketing at Equus Computer Systems, a Minneapolis-based system builder. "I'm fascinated by all the directions Intel is going from wearables, tablets and The Internet of Things. But those don't add up to bigger margins and better profits."

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Partners such as Glen Coffield, owner and president of Smart Guys Computers in Lake Mary, Fla., said his company is feeling pinched as an Intel partner.

"My Intel business has dropped from 30 percent to 5 percent in the past few years," he said. "I'm not sure what's left of Intel's partner program. It no longer sells motherboards, and I can sometimes get better pricing on Intel chips buying them via New Egg than I can from Intel."

Coffield said most of his revenue comes from managed services and that his business makes better margins with his break-and-fix business versus building Intel hardware. "Intel makes a great product, but unless you are doing huge volume or working in niche markets, like government and health care, you're barely an Intel partner."

As for Intel's core hardware business, according to its first-quarter earnings reported last week, 63 percent of its revenue comes from its PC Client group and another 21 percent from its Data Centers group -- both down for the year. Meanwhile, Intel has been investing heavily in new chip technologies as it attempts to diversify its business.

In March, Intel invested $740 million in Cloudera, a big data company that focuses on managing data through Hadoop, the open-source software system.

But some of that diversification has come at the expense of its core partner business, some partners have said.

Intel's smartphone and tablet division lost nearly $1 billion in the first quarter as it subsidized tablet hardware makers that use its processors, in a bid to make good on its promise to sell 40 million tablets this year. Intel's Internet of Things Group reported respectable revenue of $482 million, up 32 percent year-over-year.

’As Intel pushes into new markets, it’s unclear how we’ll benefit,’ said Marty Lantz, chief technical officer at MapleTronics, an Intel partner based in Goshen, Ind. "But we look at it as Intel is creating an Intel-powered ecosystem of devices and services that tie back to the data center. And the bigger the Intel-powered cloud the bigger opportunities for us to build that infrastructure"

Partners said what they want to hear most from Intel at its Solutions Summit this week is how its new chip sets and technologies can help them build servers, storage and networking gear that can help them sell more robust data-center solutions to customers. They also said they want to hear from Intel vendors Asus, Gigabyte and MSI about what their product road maps are -- something they said has been lacking ever since Intel ceded the business.

PUBLISHED APRIL 22, 2014