Intel's emergency maneuver in mobile

December 14, 2011: 10:14 AM ET

The chip maker reigns supreme in the PC and server markets, but it's failed to crack mobile. It wants to change that.

FORTUNE -- In an effort to speed up development on tablets and smartphones, Intel is forming a new business unit, the mobile and communications group. The group will be led by Mike Bell and Hermann Eul (two current Intel executives), and is made up of four existing divisions: mobile communications, netbook and tablet, mobile wireless and ultra mobility.

Intel (INTC) issued an internal memo detailing the organizational changes on Wednesday morning. The goal, according to a source close to the company, is to ramp up and improve execution in the fast-growing mobile market. The chip maker reigns supreme in the PC and server markets, but it's failed to crack mobile, despite previous attempts. So is a reorg enough to give Intel the jumpstart it needs to finally compete in smartphones and tablets?

Consolidating four separate groups into one is likely to enable better and more efficient collaboration, but it's not the magic bullet investors are waiting for. What Intel needs, more than a reorg (and more than manufacturing prowess, which it has plenty of), is to prove it has finally developed a power-efficient processor that can compete with chips based on the ARM (ARMH) architecture. Phones featuring Intel chips are expected to hit the market in the first half of 2012. Last September the company announced an alliance with Google (GOOG) to get Intel-based smartphones powered by the Android operating system to market, but it has yet to announce which manufacturers it's signed on or how many Intel-running phones will hit the market in 2012.

Intel still has a shot of building a profitable mobile business, if it gets it right (finally). It's got the resources and the manufacturing capabilities to do it. But even the company's executives have repeatedly admitted it's late to the game.

Wednesday's reorg isn't the first time Intel has changed up its wireless leadership. Last March, the company announced that Anand Chandraskher, former general manager of the now-defunct ultra mobility group, was leaving to "pursue other interests." In his place, Mike Bell and Dave Whalen were appointed co-managers of the division. Now, Bell will lead the newly formed mobile and communications group with Hermann Eul, who came to Intel via its recent acquisition of Infineon Technologies' wireless solutions business. As for Whalen and the other executives who were in charge of the former groups (including Aicha Evens and Doug Davis), they'll be staying on to help with the transition, though it isn't clear what their roles will be going forward.

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Michal Lev-Ram
Michal Lev-Ram
Writer, Fortune

Based in Silicon Valley, Michal Lev-Ram covers enterprise and mobile technologies for FORTUNE. Prior to joining FORTUNE, she wrote for CNNMoney, Fast Company, Popular Science and other business and technology publications. She was also a staff writer at Business 2.0 and holds a B.A. in journalism from San Francisco State University.

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