Intel layoffs post-mortem points to cloud, mobile as primary suspects

Posted by Ron Miller on Apr 22, 2016 12:00:00 PM

Intel layoffsThis week news emerged that Intel was laying off 12,000 people. You never like to hear about that many people losing their livelihoods, but it's worth exploring how Intel got to this point, and the likely suspects are cloud and mobile.

For years, Intel was tied to the desktop computer, and having 'Intel Inside' was a mark of quality for a PC. Moore's Law, the notion that the number of transistors on a chip would double every two years, was real, and it mattered because we craved more raw power on the desktop.

I bought my first MacBook Pro in 2006 when Apple decided to use Intel chips. That allowed me to run Windows in a virtual machine, something I required at the time for certain programs.

The year I bought my first Apple product was the same year Amazon launched Amazon Web Services and with it, ushered in the age of cheap cloud services. A year later, Apple introduced the iPhone, and that magic combination of cloud and mobile changed our computing focus.

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Then came the apps and the App Store where we could deploy these simple, elegant apps ourselves without help from IT.

We were no longer tied to our desktops. By 2009 the iPad came along, and it took some of the money going to PCs too. While it wasn't a replacement it at work, it surely could be at home, and over time PC sales began to break sag.

Slumping PC sales

In its most recent report, IDC reported PC sales were down 11.3 percent for the first quarter. That's part of a longer term trend of slumping PC sales. This is exacerbated by the cloud vendors, which you might think would be picking up the slack as they build massive data centers around the world. Unfortunately for the PC and chip makers, it doesn't necessarily work that way.

Companies like Google, Facebook, and AWS are no longer buying hardware from Dell, HP, and other PC vendors, but instead they are designing highly efficient hardware themselves. Intel certainly recognizes this shift and has actually designed a line of chips this year specifically geared toward a cloud market.

But when you combine the loss of PC business with the fact they are late to the cloud and have not had very much success in mobile, it produced an inevitable negative business impact — and that led to the Intel layoffs announcement this week.

Intel made it clear in a call to analysts and the press that it recognizes all of this, and the executive team has to live with the fact that it didn't see those trends coming together soon enough. Instead, like so many disrupted companies, it couldn't abandon the most lucrative part of its business, even though it saw these changes coming.

It won't be the first company to feel the sting of change driven by cloud and mobile, but it's unfortunate for the people who will bear the brunt of that indecision. The flip side, of course, is all of the businesses that were born as a result of those same trends.

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Photo Credit: Aaron Fulkerson on Flicker. Used under CC by SA 2.0 license.

Topics: Cloud Trends

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