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Tue, Jul 20, 2004 - Page 12 News List

Analysts eye Maloney's.job at Intel

STRUGGLING DIVISION Despite the Centrino chip, communications has been floundering due to a series of decisions that left it some US$850 million in the red

NY TIMES NEWS SERVICE , SAN FRANCISCO

SeanSean Maloney, executive vice president and general manager of Intel Communications Group, is pictured during interview in Santa Clara, California, on July 2. For Intel, the wireless business is increasingly important, yet the division has been a trouble spot. Maloney said the division would become profitable next year, despite investors' skepticism.

PHOTO: NY TIMES NEWS SERVICE

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.

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.

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