Intel is slashing its iconic Intel Inside program – a major source of funding for the past two decades aimed at helping OEMs and channel partners drive PC sales growth – by anywhere from 40 percent to 60 percent, according to multiple industry sources briefed on the cuts.
Sources, who did not want to be identified, said the cuts are going to reverberate through the industry, ranging from potential PC price increases from OEMs to cutbacks in marketing from systems builders and solution providers.
"We're hearing that major cuts are coming throughout Intel's marketing and channel programs," said a top executive for a major Intel partner, who has been informed of the cuts.
"The marketing funds have been moved to other groups within Intel that aren’t channel-specific or PC-centric. The funds will now go towards driving the business in data centre, giving more to the data side of the house instead of compute. A lot of dollars are moving to other areas or kept in house to improve Intel’s profit and margins."
Intel confirmed to CRN US changes to the Intel Inside program but did not specify or confirm the amount of the cuts at this time.
"While we are evolving how we co-market with our OEM customers, the Intel Inside brand continues to be an important symbol of performance and quality," said an Intel spokesperson.
"The changes we are making are intended to help customers more efficiently and effectively market with Intel, while helping us market with more precision in alignment with Intel's business priorities."
Through Intel Inside, Intel processors became a household name. The 26-year-old-program, one of the world’s largest co-operative marketing programs, offers compensation and funding incentives for channel partners and OEMs to market and sell the Intel brand on products – including PCs, servers, tablets, workstations and connected consumer devices.
Intel has used the marketing funds for decades as a competitive weapon to dominate the processor business. Major OEMs and partners have come to rely on the funds as an integral part of their sales and marketing plans year after year.
The Intel Inside program debuted in 1991 and, by mid-1997, 1500 OEMs were participating in the program, according to an AdAge encyclopedia listing.
"This most likely is going to result in price increases from the OEMs," said the CEO of a major solution provider, who did not want to be identified.
"It's unfortunate that it is happening at a time when component costs are at the highest they have been in years. It doesn't bode well for commercial customers with new RFPs [requests for proposal] for PC purchases."
The CEO said he expects the funding cut to have a "ripple effect" across the entire Intel ecosystem.
"Intel is a piece of everything we do," he said. "When you have a cut in funding like this with a vendor that has 90 percent share of the PC and server market, it is going to have major ramifications for OEMs, partners and customers. This is the kind of crap that rolls downhill. Intel is facing major cost challenges. It's disappointing, but it's not surprising."
For the channel, the program supports partners selling products with Intel's Atom, Core and Xeon processors. Partners who purchase these processors accrue co-marketing funds and get reimbursed for compliant marketing activities.
Intel Inside was tied to volume, so if a large systems builder sold 10,000 PCs a year, it would get a certain percentage of funding from Intel tied to specific ways of using it, said the partner.
Channel partners would have to follow strict guidelines to qualify for funds for ads.
The partner reaped several benefits of the program, including compensation in marketing efforts, price matching rebate funds and funding advertising activities, as well as trade show support.
"The way the money used to flow, Intel would offer pure rebates back to us through direct payments or price reductions... we would see reduced compensation in regards to marketing events. Bigger partners would get a big chunk of compensation for bigger consumers, and many big gaming guys are heavily dependent on Intel Inside dollars to promote the brand," said the partner.
Intel Inside funding cuts will impact the channel community at different levels, sources said. OEM cuts are expected to reach 40 percent to 60 percent, while larger enthusiast gaming systems builders will see a marketing cut as big as 20 percent and smaller VARs will see a marketing cut of 3 percent, according to sources.
One source, who has been an exclusive Intel partner for many years, said that due in part to dwindling marketing and engineering support from Intel, he has recently "moved on" and partnered with other CPU manufacturers – including a significant deal with Intel competitor AMD.
"Intel Inside was once a very critical program for the channel," said another partner, who wished to remain off record.
"Back in the day, it was a critical marketing tool for hundreds of systems builders, particularly for partners who didn't have a formal marketing program. It gave them opportunities to create marketing and funding strategies and building their businesses around it."
One top marketing executive for a major technology vendor, who did not want to be identified, said the cutbacks are a sign of the times in the computer business as vendors demand more accountability in the use of marketing funds in the digital marketing era.
"I am sure Intel is looking at the hundreds of millions of dollars they are spending and demanding more accountability," he said.
"It used to be the funds were a direct result of how much you sold and could be used for whatever you wanted. Those days are gone. This has been the gold standard for marketing funds. It was the most successful tiered marketing program in the history of the technology business."
Intel has been grappling with the struggling PC market through massive reorganisation efforts. In 2016, the company said that it would cut 12,000 jobs globally and that it would shift its focus from PCs to the lucrative data center and Internet of Things markets.
According to market research firm IC Insights, the chip company, which has held the No. 1 supplier position in the semiconductor industry since 1993, could be replaced by Samsung.
According to the report, Intel is expected to trail Samsung in the full-year 2017 semiconductor sales ranking by US$4.6 billion.
Partners said cuts in the marketing program funds are a further indication of this transition from client compute to other markets.
"It was a great program, but with all the changes in the systems builder and OEM community it doesn’t shock me," said a partner that is coming to grips with the changes.
"Like everyone else, they're trying to figure out a way to offer services and software while the pure hardware model is tougher."
Steven Burke contributed to this story.