NEW YORK (AdAge.com) -- The consumer-electronics business is facing the worst consumer environment in years, and chip giant Intel is feeling it, having lowered sales estimates twice for the final three months of 2008. But the company -- which spent $300 million on marketing in the United States last year -- is launching new products in the midst of it, including the high-end Core i7 processor, a new generation of stripped-down "netbook" computers with Intel's Atom processor; and a line of web-connected TVs powered by Intel chips.
Chief Sales and Marketing Officer Sean Maloney, 52, began his career at the chip giant in 1982 and has witnessed his share of downturns in the economy, learning some lessons on how to respond. We caught up with him amid Intel's huge presence at the Consumer Electronics Show in Las Vegas.
Ad Age: What is Intel's plan as far as spending in the downturn?
Mr. Maloney: Intel was established in 1968, and the philosophy since then whenever we've had recessions or depressions has been to invest during downturns as much as you do in the good times. You need to do that, because if you give up on doing research and development or building factories, you're not ready for a recovery, one; and second, you're not [doing the] designing and manufacturing that will cause a recovery. You need to recover using new technology -- that's how you generate new cycles of purchases, and that's very much in the bloodstream of our company. We don't give up in tough times.
Ad Age: What is your mix in terms of marketing to consumers vs. marketing to businesses?
Mr. Maloney: If you look at the computer industry over the last three, five years, the big thing is [that there's been] a very, very rapid shift to consumer. In the same way that the cellphone industry at the beginning used to be [about] really a business purchase and ultimately became driven by consumers, the same thing is happening in computers. It's not that classic IT departments aren't important -- they're still important, they're still very significant -- but at a hundred thousand feet, the industry is going mobile around mobile computers, and a lot of those purchase decisions are made by consumers. So reaching consumers is more and more important.
Ad Age: The brand obviously drives the sales of computers; how will it do so for TVs?
Mr. Maloney: We haven't really decided what the branding strategy would be there. Consumers globally tend to associate Intel Inside with PC functionality, and so if you're trying to say to someone that you've embedded a PC inside of your TV, the Intel Inside brand would probably be pretty useful, but we haven't really made a decision on what to do there.
Ad Age: Will Intel participate in the marketing of these new web-connected TVs?
Mr. Maloney: We will definitely be working with our big customers on these web-connected TVs. Here at the Consumer Electronic Show, as [has been the case] the last three or four years, it's very much dominated by flat panels. Nearly all of them, 95%, are orphans; they're disconnected from the internet and, of course, the internet is where a lot of the interesting content is. So in the next two or three years there's no question people are going to embed PC functionality into these displays, so that not only can the consumer use the broadcast medium, but they can also use the internet, where they're spending much more of their time.
Ad Age: At what point do these Intel-powered TVs become meaningful for Intel, in terms of your sales?
Mr. Maloney: I don't know when it gets to be mainstream. You're seeing this year PC connectivity in a few of these devices using Intel technology, and a few of these flat-panel TVs. Next year you'll see it in more. My suspicion is that it will take a few years before it's a must-have feature. But I think that will happen; at a certain point people are going to insist that when they go buy that big, fancy flat panel, it has internet connectivity, because that's where so much of the content is.
Ad Age: What is the strategy around marketing low-cost computers, such as netbooks? Is that more important when people have less money to spend?
Mr. Maloney: We've spent the last year-and-a-half establishing the netbook category. It's one of the big hits of the show here. At the moment, these things are getting a huge amount of attention. In the next 12 months, we'll be spending a lot of time working on classic notebooks, which are still a kind of must-have item -- a lot of these netbooks get purchased as secondary or tertiary devices -- but both of them will be marketed together, both netbooks and notebooks.
Ad Age: What is the future as far as converged TV/computer-type devices -- the web and TV?
Mr. Maloney: Any display device is going to end up having to be connected to the internet because that's where so much of the content is. It's already that way with PCs. The latest data from Europe, the U.S. and China show people spend far more of their time prioritizing their time now on the internet, on their PCs. They consider that to be a much more useful device than their television. And so ultimately, every device is going to get connected, and the PC will be the primary way you interact with the internet -- whether it's social-media sites such as Facebook where you're uploading pictures or whatever -- and the flat panel will be a kind of [way to] sit back and look at both broadcast content and internet content, but more in a passive mode.
Ad Age: In terms of your marketing mix for the coming year, how does digital fit into what you spend on media and how you reach consumers?
Mr. Maloney: We said a year ago that we were going to have a significant shift online in our spend. That happened, and we've spent a year really learning an incredible amount, all the way around the world, about how different consumer groups in different countries react to the internet. Obviously the one takeaway is that product preference and purchase decision are both heavily influenced online, and it's pretty ubiquitous that consumers do research on both products and brands on the internet -- even in countries with low internet penetration, because people go into cybercafés and spend a lot of time there. So the medium gets to be incrementally more important.
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