When Sean Maloney was 12, a teacher admonished him for troublemaking and assigned him to write 1,000 times: "I will not talk in class." The next day, he showed up with a computer program that wrote the sentences automatically.
Maloney, now 48, might hope he can conjure another quick, innovative fix. In January, Maloney, a self-taught engineer and rising star at the Intel Corp, was tapped to run the company's struggling communications division, which is responsible for making chips that operate in laptops, hand-held computers and cellphones.
For Intel, the wireless business is increasingly important, as it is for other technology leaders, given the boom in mobile communications. Yet the division has been a trouble spot in the company, despite the marketing success of Centrino, its wireless chip for laptop computers.
PHOTO: NY TIMES NEWS SERVICE
In fact, the communications division has been floundering after a series of poor business and engineering decisions that left it losing around US$850 million last year.
"We plan to become profitable in 2005," Maloney said of the communications division, which did US$4 billion in sales last year.
But he said that skeptical investors were "wondering if we can do that."
Intel, with US$30 billion in sales last year, had a surge in profits in its recent second quarter, with earnings nearly doubling from the same period a year earlier.
But its shares dropped more than 12 percent last week, closing at US$22.73 on the NASDAQ on Friday, on news that its inventories are rising, which causes a decline in gross profit margins. At the same time, the market is showing jitters about an overall softening in the technology sector.
Investors have expressed concern about Intel's long-term growth, though it still owns some 85 percent of the market for microprocessors that run personal computers. But the personal computer sector has stagnated even as demand for mobile devices has skyrocketed.
For some skeptics on Wall Street, Intel's failure to translate its expertise and dominance of the computer microprocessor market into expertise building chips for mobile devices is a serious issue -- particularly because they say dominating the wireless field will be pivotal to Intel's future.
Making gains in "the communications business is just critical in terms of broadening the market and enabling growth for Intel," said Tim Luke, an analyst with Lehman Brothers.
Luke and other analysts point out that so far Intel has had little success getting into the cellphone microprocessor market, which is dominated by Texas Instruments Inc and Qualcomm Inc.
That failure means Maloney's performance will be scrutinized.
"He's got one of the pivotal jobs at Intel," Luke said.
An immigrant from England, a college dropout and the youngest of six siblings, Maloney arrived at Intel in 1982 and has enjoyed a steady rise. By 1992, he was the technical assistant to the chief executive, Andrew Grove; three years later he was named to lead Intel's sales and marketing effort in Asia.
From 1998 to 2001, he ran the company's worldwide sales operation. In 2001, he took over a part of the communications business, overseeing sales of semiconductors for network equipment like routers and switches. In January, he was given control of the rest of the division -- and a mandate to turn it around.
His challenge is to sell computer chips not just for wireless-enabled laptops -- a sector where Intel, though late to the market, is still successful -- but for phones and hand-held devices.
In the case of phones, the gadgets rely on two basic pieces of hardware: computer chips to process voice signals and programs, and flash memory, which is used to record data like phone numbers. In both areas, Maloney said, Intel is scrambling to reverse its fortunes.
Michael Masdea, semiconductor industry analyst with Credit Suisse First Boston, said Intel's flash memory business was thriving in early 2002, and the company had a market share of some 43 percent.
But feeling strong about its market position, Intel raised its prices, and its customers bolted.
Masdea said the company's market share dropped to around 30 percent, a figure Intel does not dispute.
"The market zigged, and we zagged," Maloney said of the company's decision to raise prices.
He said the rest of the vendors had also pushed up prices but Intel had worked to refine and improve its features. He said that since January, he has made numerous visits to handset makers, trying to rebuild relations.
"I'm comfortable we're working our way back in," he said.
Intel's quarterly results, released last Tuesday, showed a slight improvement in the flash-memory business.
Paul Otellini, the company's president and chief operating officer, said the company had a rise of several points in its market share for flash memory.
Despite the improvement, Masdea said investors remained uncertain whether Intel could continue to grow in this area.
Improving its position in the market for microprocessors for handsets is even more challenging, since Intel's market share is nearly nonexistent. It does not sell processors in bulk to any of the major phone manufacturers like Nokia, Sony Ericsson, Samsung or Motorola, Maloney said.
To build a presence, the company was supposed to introduce in the middle of last year a semiconductor called Manitoba that combines processing and memory on a single chip.
But that chip was not widely distributed until this year, and it flopped.
Several analysts said that Intel had struggled in the mobile-phone market in part because handset makers have been worried about becoming dependent on Intel, as PC makers already are.
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