Moore’s Law of Growth is an inverse law. The bigger the number, the harder to multiply it.
Over the last few years Intel has learned this version of Moore’s Law to its sorrow. The ship has become enormous, and enormously hard to turn. Even if new CEO Paul Otellini knows what must be done (and I think he does) he now has this huge corporate culture to change, and cultures don’t change overnight.
I learned this first-hand a few years ago. I did some work for what turned out to be a unit of Intel purchased from another company. These people didn’t understand the idea of selling platforms. They wanted to sell chips. Specifically, they wanted to know how their rivals sold chips so they could copy the process.
Well, they couldn’t copy the rival. In order to sell enough chips to make a dent in the balance sheet, Intel has to sell general-purpose chips, not a series of chips for specific functions, with specific amounts of power. The only way to succeed is with a platform strategy, which Otellini has now put in place.
But even the best strategy in the world doesn’t beat Moore’s Law of Growth.
So people who look at investing are starting to abandon Intel.
Intel has not performed for investors this century. Cisco has pretty much the same problem.
So I’m flipping channels last night, and come upon Jim Cramer’s Mad Money. Cramer was pushing Atheros, and dissing Intel something fierce.
Is he right? Maybe. But look at the chart. There is risk in Atheros. While it has great products, it lacks the OEM pipeline of Intel. Still, a single big deal for Atheros could power the stock forward, very fast. Just so long as you’re aware that an event Intel might shrug off — a lawsuit, a bad quarter — could sink your Atheros investment. And its current price-earnings ratio is 78. That’s Google territory. Intel’s, by contrast, is about 14. It has spent the last 5 years going from being a growth stock to being a value stock.
What is the real difference between the companies? Numbers. Atheros is much smaller, just 260 employees. Total sales for the last year are under $200 million.
It’s easy for someone like Cramer to tout a stock like Atheros. He puts his disclaimer up, you may be hammered, and if you buy right after a tout like last night’s you will be hammered.
But this is not a story of Intel being stupid or Atheros being clever.
This is Moore’s Law in action.
