Intel stumbles on supply issues

Intel took an unexpected and major stumble in Q4 2005, the world discovered last night. And it seems as though it's related to supply issues.

Intel blamed the miss on an ongoing shortage of chipsets, (the chips that sit between a computer's main microprocessor, its memory, and other parts of the computer) coupled with a weakness in PC sales, particularly in the US.

And boy have Intel been punished. Their stock price has tumbled over 10% and analysts are being unforgiving. And now Otellini is on the back foot trying to defend their forecasting and supply chain issues while accepting that they have problems.

And he has decided that Intel will no longer provide such regular updates. For they have been punished hard for getting their Dec update on Q4 wrong (they predicted revenues would come in at least $200M higher than they did).

It even looks like this lack of chipsets has hit PC makers sales in the critical end of year holiday season. This may lead to PC makers shifting more business toward AMD. Speculation is already rife that Dell may end their exclusive relationship with Intel by end 2006. And Gateway used AMD chips in more of their lines pre-Xmas.

So, poor old Intel and poor old Otellini who started the year with such a bang. At the beginning of January he and his new marketing head trumpeted Intel's brand new strategy and brand - it's all about consumer electronics. Then he made a bunch of bold announcements at CES and he even joined Steve Jobs (dressed as a bunny!) at Macworld to impress everyone with their early delivery of Intel Macs and Powerbooks.

So, his stumble makes Intel look a little silly. And proves to the world that the Intel change in strategy is perhaps a little overdue and bound to be frought with transitional challenges.

But, utlimately Intel will get over their supply issues and they will execute on their new strategy - they have to, it's bang on. But, the markets will have to be patient and we all know how good they are at that. If the tech bull market continues investors may even give Intel a break. If not...