We stabilized product prices to combat slowdown

Dallman has seen the channel grow from box pushers to organizations that
now build futuristic systems. He talks about why Intel continues to invest in
channels

Has there been a dip in partner membership in your network?

We roughly have two lakh partners in our channel membership programs
currently. Of this number, over 55,000 individual partners have been buying from
us regularly and consistently, over the past few years. Due to the slowdown, on
a global level, the purchases of a couple of thousand partners from us dipped.
This could also be because they were selling off their existing inventory to
save cash and keep their business profitable.

How has Intel helped its channel during the recent economic slowdown?

Q4 2008-09 was when the market underwent a panic mode and there was a
phenomenal amount of negativity. It came down to a level where channel purchases
began drying up.

At that time, we stepped in to stabilize the situation by stabilizing the
prices of our products in the market. We came out with credit programs for our
distributors so that they could continue to offer credit to the channel, which
was really successful. We have been very sensitive to the needs of the channel
and our sales figures indicate that we have established a baseline and are
starting on top of that baseline. The channel is responding very favorably to
that.

Have these steps been taken only because of the slowdown?

We work in steps to help the channel ecosystem depending on the need of the
market. On a regular basis, when we announce a new product line, we ensure that
our distributors have inventory to quickly push it into the market. So with the
Xeon 5500, before we sold a single unit, we had over 25,000 of these CPUs with
our distribution channel in the main countries.

This aside, we also ensure that it's easier to get our products into the
market. Our Enterprise Product System Division ensures that there are at least
five to seven motherboards ready in the distribution inventory, all set to be
shipped when the product is launched.

We also put together technical solution training programs where we usually
focus on the top technologies in each location and fly them in to give our
partners hands-on training. We give them the chassis, board, CPU and sometimes
even software. Then the partners are trained on how to integrate it, and how to
get maximum performance from the system.

We are probably the only company in the world which does not build systems
but still goes to that level of training for the channel.

What are some of the larger initiatives undertaken by Intel in the past
few years?

In the past couple of years, there have been three very large initiatives
undertaken at Intel. One was to convert our business over to the 45 nanometer
technology. One of the goals we had was to see how quickly we could take this
product to the market as it improved our competitiveness.

The next big initiative was the QuadCore, and here too the channel sale is
much higher than the direct accounts. This is because partners sell face-to-face
and talk about the features and advantages, and are able to demonstrate the
benefits of these products.

How does the channel sale compare to your direct customer account
business?

We've noticed that the channel could make the transition to the new products
and technologies faster. The percentage of 45nm units sold by the channel is
larger than that of our direct OEM sales, which is very significant.

And our partners are not selling just desktops. They are selling servers as
well. The total number of servers sold by the channel is much higher than our
biggest server vendor customer.

Even with the Nehalem processor, the channel not only shipped a higher
percentage of the products than all our direct customers put together, but they
shipped a higher number of units as well. In fact, during this technology
transition over the first six months, the channel shipped almost twice the
number of units as our direct customers.

Vinita Bhatia

vinitavs@cybermedia.co.in