Intel's 2009 Bankruptcy: A Cautionary Tale
Yes, this is fiction, but it is designed to show a basic flaw in Intel's CPU strategy. Although I am personally thrilled about their new Nehalem lineup and expect to be one of the first in line to purchase one, the processor does have a very critical vulnerability... as you will see.
The Google New York Times
Intel Declares Chapter 11 Bankruptcy
November 13, 2009 - Washington, DC - The single remaining major personal computer processor manufacturer declared Chapter 11 today in what may be the largest technologies bankruptcy of the century.
In a letter to shareholders and the public, Intel CEO Paul Otellini explained that "global factors outside our control" forced the company to become insolvent, and that "all steps would be taken to satisfy creditors' demands and restore shareholder value." Intel (INTC) stock plunged to 37 cents by the close today leading a massive technologies selloff on the NASDAQ which brought the index to the triple digits for the first time in over fifteen years.
Intel promised to continue normal manufacturing of its processors although industry analysts wondered how and why the company would want to keep shipping product to an already saturated channel. Computer products distributor Ingram Micro CEO Alain Monie remarked that "we haven't shipped more than a couple of thousand Nehalem CPUs since last year's launch, so we certainly don't want to stock any more for the foreseeable future."
Intel's problems paradoxically began with the closure in November 2008 of its longtime rival AMD when the major shareholder, the Abu Dhabi based Mubadala Development Company, sued it into bankruptcy to sell off its assets. Although most companies would rejoice at the elimination of their only major competitor, Intel was soon hit by a double whammy of external events. In December 2008, Microsoft announced that due to fundamental flaws in the kernel code it had suspended development on Windows Seven, the long awaited successor to the troubled Windows Vista. Microsoft's announcement effectively stopped the ever escalating spiral of more powerful processors required to run operating system software that became more complex in each release.
The coup de grace occurred the following month when the Chinese military invasion and occupation of Taiwan sealed off the island nation's manufacturing capacities, eliminating the supply of its RAM memory units from the global marketplace. The remaining manufacturers outside of Taiwan dedicated their entire capacity to the DDR2 type of RAM units which are used in the vast majority of computers. Intel's Nehalem processor is designed to work only with the more advanced DDR3 RAM and as the supply dried up, the price for that type of memory skyrocketed to over $1,000 per Gigabyte, effectively eliminating most computer users from being able to afford a Nehalem based system.
Many industry observers had anticipated Intel's black Friday the Thirteenth announcement. The processor manufacturer had been roundly criticized late last year when it unexpectedly ceased the production of its extremely popular Core 2 series of processors to force users to upgrade to its new Nehalem chips. This was widely seen as the new monopoly in the processor manufacturing industry flexing its muscle in the absence of competitive pressures from the defunct AMD, but it turned out to be a fatal decision. By switching over all of its manufacturing capacity to Nehalem, the company's fortunes were irrevocably tied to the cost of DDR3 RAM. The Chinese military action against Taiwan had been foreseen for years, but Intel chose to take the risk that affordable DDR3 RAM would be available for its new processor, and lost.
Dan Hutcheson, an analyst at VLSI Research, blamed Intel's woes on fundamental arrogance in the boardroom. "When AMD went under, they felt they could eat up the world. It just so happened that the world bit back."
More by this Author
Of all the incredibly stupid things people do to their CPUs, including overclocking them until they are hot enough to melt steel, the single most imbecilic modification has to be lapping. Using absurdly...
The Most Outlandish Computer Comparison Ever! A 1986 Mac Plus pitted against a 2007 AMD Athlon 64 X2 4800+ DualCore in a series of Microsoft Word & Excel user tests. You will NEVER believe who wins!
Genovese pasta sauce has been Naples' best kept secret for over 400 years. This incredible onion-beef sauce simmers all day long until it's poured over steaming hot pasta and covered in Parmigiano Reggiano. Irresistible!