Intel cuts back non-strategic activities

Intel appears to be rationalising what it no longer considers to be strategic activities, after announcing plans to close its third business unit since the start of the year.

The chip giant sent a memo to customers earlier this week indicating that it intends to terminate its Internet Media Services (IMS) network for broadcasting streaming media content in the second quarter, although it will help them move their applications to third-party service providers in the interim.

The move follows Intel's abandonment of a web hosting service for small and medium sized enterprises last week, and the closure of its Shiva remote access product division at the beginning of the year.

Jo D'Elia, vice president and service director at Gartner Group, said: "I wonder if Intel is going through a rationalisation process. If you look at what it's been doing, it's been investing in a range of companies and technology with a view to broadening its reach from servicing the PC market to servicing the internet space."

"Whatever it gets into it wants to be the dominant player and it seems to be shutting down businesses that are not going to make it big money as soon as it expected, or that third parties are doing a better job. It looks like it's asking itself 'Do we still need to be in this, and is it worthwhile?'," he added.

Alison Pugh, Intel's sales and marketing manager for IMS in Europe, the Middle East and Africa, said she was unable to comment on the company's corporate strategy, but said that the unit's 200 staff would all be redeployed elsewhere in the organisation.

"We're not stopping playing with services, but the market has moved very rapidly and we don't have the short-term ability to make a return on investment," she explained.

"There are too many service providers offering services that are too similar, which means that pricing models are depressed and margins are non-existent. Also, from the customer perspective, the general US downturn is making people nervous so they're not starting new projects and many companies have not survived the dotcom shake-out," she added.