September 29, 2000 10:00 AM PDT

Intel cancels its Timna chip

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Intel has canceled the Timna processor, a long-delayed chip for the budget market--the latest surprise in a long, sour month for the semiconductor giant.

The Timna, which was expected to come out in the first quarter of next year, has met its doom because of design problems and market conditions, an Intel representative said today.

The news follows reports from PC makers yesterday that the Pentium 4 won't come out until November, and possibly later. Last week, the Santa Clara, Calif.-based company stunned the investment world by stating that revenue for the third quarter will be substantially below expectations because of slow sales in Europe.

Intel delayed Timna earlier this year because of bugs in a necessary companion chip called the Memory Translation Hub (MTH). Removing those bugs, however, would have pushed the release of new systems toward the second quarter of next year and beyond the time when manufacturers could adopt it for their new product lines.

Additionally, manufacturers have indicated to Intel that they don't really want the chip. Because of smaller motherboards and chipsets that integrate graphics, the cost savings that Timna promised have already been achieved. In essence, it's a product that became obsolete before it arrived.

"Today's action reflects the fact that we are focused on the products they want," the representative said. Factory capacity earlier allocated to Timna will now be used for Celeron processors and other parts for budget computers.

Despite Intel's assertions, the cancellation will likely prompt analysts to question whether the company has lost its focus. Since early 1999, the company has been on a mission to diversify the markets in which it sells and has acquired more than 20 companies in the process.

Although most analysts have said that diversity is a strategic necessity for the company, the effort also coincided with a rash of manufacturing problems and product delays. Some analysts have noted that some of the executives who oversaw manufacturing and quality control, such as executive vice president Gerry Parker, are now in new business development positions. Intel CEO Craig Barrett acknowledged the problem in an interview in August and vowed that the problems would end.

"I don't believe (Intel had) bad luck in that stuff...We kind of dropped the ball," Barrett said. "We have been embarrassed by the slips and are dedicated not to have a continuing episode of these slips."

Humberto Andrade, an analyst at Technology Business Research, raised concerns in a report last month about the company's ability to continue to perform adequately in its core markets while ambitiously trying to enter other ones.

"Intel's core strengths in product design and volume manufacturing are slipping as the company spreads its resources thin across many business focuses such as (Internet service providers), communications, and network companies," he wrote.

"Yet, overall we fail to see a common vision integrating the more than 20 acquisitions Intel has made during the past few years, and TBR is concerned Intel is flailing in its business diversification efforts. With production constraints and continuous slips in product delivery, we are increasingly concerned that the company's attention to management is diluted across too many business activities."

 

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