Relentless pace of PCs to slow
The design cycle of the desktop computer is going to slow down, but Intel and PC makers don't plan to come out any worse for the wear.
Computer manufacturers are beginning to slow the relentlessly rapid pace of change to the internal design of corporate PCs, according to executives at Intel and Compaq. Though corporate desktops will continue to incorporate the latest and greatest Intel processors, many of the other components, such as circuit boards and graphics chips, will remain relatively static, they said.
The motives for the slowdown are complex and carry significant implications.
By buying systems with fewer changes--especially in components that do not necessarily have a visible impact on performance--large corporate customers won't have to spend considerable time and resources test-driving PCs before purchase. Currently this "qualifying" process for new computers takes months.
But PC manufacturers and Intel may benefit even more than their customers. Because the desktop's processor will still change, the price of a business PC may actually go up rather than down, even though companion chips and motherboards will naturally fall in price.
Both Intel and Compaq are already moving ahead with plans to decelerate. Compaq will continue selling its current Deskpro EP and EN lines until after December 1999, which will give these PCs an 18-month active life, said Michael Takemura, North American desktop marketing manager at Compaq. Typically, these machines would have been phased out after 12 months.
Other vendors are expected to extend corporate PC life spans as well, sources said.
Intel, meanwhile, has launched on a strategy to manufacture "chipsets that last over multiple generations" of PCs, rather than just one, said Paul Otellini, executive vice president at Intel. Chipsets are companion chips to the main processor.
Customers want fewer changes
The slowdown in development stems from large customers' demand for rational stability, said Otellini. "They are saying, 'Give me a platform that is not going to change,'" he explained.
The benefits can be fairly substantial. The qualification process for a new PC now may last 60 days, said Takemura. By moving to a more stable platform where only the processor changes, that can be shortened to three to five days.
Though customers have wanted more stability for a while, their demands have kicked into high gear as a result of the Year 2000 bug (Y2K). "For the past three to five years, customers have said, 'Minimize changes,' but they have not been more vocal about it than in the past 24 months," he said. "Y2K has magnified it."
Stability starts now
Compaq will actually launch into stability strategy even before Intel has chipsets ready that can be used in multiple generations, said Takemura. Next year, Compaq will come out with machines that use Intel's next-generation processors, which Intel calls "Katmai."
These new machines will not replace the current Deskpros, however, but will be sold alongside them, he said. Effectively, Compaq will have four sets of corporate desktops being sold in the market.
Katmai will also contain features that will make it easy for computer vendors to resist changing their systems. The processor will be compatible with the current Intel chipset, which works with today's Pentium II processor, said Roger Kay, an analyst with International Data Corporation.
But the new strategy doesn't mean Compaq won't move toward cutting-edge technology on other fronts or take advantage of price drops. "Customers do not want to have to deal with whole new sets of products every six months, but how do you do that?" he asked. "What Compaq cannot do is slow down the pace of technology," commented Kurt King, computer analyst for NationsBanc Montgomery Securities.
The Compaq Prosignia PC for small-business customers, released last week, will change monthly. "It will change on a 30-day basis with whatever the state-of-the-art technology is," he said. Although the Prosignia is targeted at small and medium-sized businesses--which often have much less stringent qualification processes than those of their larger counterparts--large corporations can buy it as well.
Compaq will make changes in its corporate line when appropriate, but overall the platform will be more stable and enjoy longer life, Takemura predicted.
Costs go down, but will it work?
The "deceleration" policy will allow PC vendors and Intel to get faster processors to market quicker, which in turn could boost balance sheets, said Pat Gelsinger, corporate vice president of the desktop products group.
Currently corporate customers buy the same computer for a year. Because of continual discounting, the machine gets cheaper as the months roll on.
Under the new strategy, however, PC vendors will be able to upgrade the processor during the year without disrupting the qualification procedures. This will mean that corporate users will be getting the quicker--and more expensive--processors faster than they normally do.
As a result, Intel's average selling price for desktop processors could stabilize and possibly track up, Gelsinger noted.
While stability might be good for Intel, PC makers, and customers, life could become more complex for component makers, said Kay. "They have less of a chance of getting a design win," he said. "If you don't get your sound card in there one year, it might be two years before you get the opportunity again."
The field of potential losers includes makers of chipsets, motherboards, networking cards, memory subsystems, hard drives, and graphics chips.