Constructive confrontation

One company that has two such initiatives is Intel. With revenues of $26.5 billion in 2001, Intel is one of the long-time leaders of the IT market. It is proving to be a South African leader in practical education, doing more to close the digital divide than one would expect from a 12-person company.

A return on R5 million

Intel has two global education initiatives running in South Africa. The first is the Intel Computer Clubhouse Network, a community-based education programme that enables youth in disadvantaged communities to “acquire the tools necessary for personal and professional success”, says Steve Nossel, Intel SA country manager.

The clubhouses are equipped with the latest technologies to enable the youngsters to gain a working knowledge of PCs in a fun environment with mentors and teachers to assist them [volunteers welcome]. The company has committed R5 million to support the project over three years and by the end of the first quarter of 2003 three such clubhouses will be up and running.

The second initiative is the Intel Teach to the Future project, a worldwide effort to help both experienced and new teachers integrate technology into their teaching and enhance student learning. Nossel personally believes education via a PC, specifically home education, has a critical role to play in the future of South Africa, but laments the lack of bandwidth and home PC penetration.

Being such a small entity in South Africa, the Intel office is a sales organisation and interacts with users of its products through a channel. “Our customers are the integrators and resellers and we only work through these organisations, with one exception,” Nossel explains. Mustek has been Intel`s only direct customer in the country for a number for years. With Mustek having the lion`s share of PC sales in the country, it is obvious why Intel makes the exception.

There are about 1 600 resellers in the country, selling Intel products on an as-and-when basis. Fewer companies make it as an Intel Product Integrator as they have to sell a certain number of products per quarter. Furthermore, there are 17 Intel Premier Providers acting in the upper echelon of Intel`s South African channel.

Intel SA also collaborates with international companies such as Dell in areas where both companies benefit. Local Dell marketing manager Leigh Hancock says that although all the company`s systems are made to order in Ireland, the local entities support each other in sales and marketing exercises in South Africa.

Apart from its education initiative, Intel SA is also involved in more immediate partner-based BEE initiatives. “We are working closely with Sita to develop ways in which we can gain more BE partners on all levels,” Nossel affirms. “We currently encourage firms to join one of our partner programmes and take advantage of the training and technology updates so that they can better serve their clients.”

Alex Mann, South African representative of AMD, Intel`s processor nemesis [a four-person operation in SA], estimates that AMD has captured about 21 percent of the local processor market. AMD does not have any direct BEE programmes, but contributes to economic upliftment through its partners. “We assist wherever possible,” he says. “Our partners have the empowerment projects and we can have the greatest impact through them.”

Attack of the rand

Although 2002 was a tough year, Intel SA did not see any decline in its business. The company`s structure means it does not carry stock itself, but its distributors do. It was therefore a challenge for the distributors not to be caught with excess stock during the rand`s decline.

Nossel says it is less likely that excess stock would be a problem as Intel`s electronic ordering system allows distributors to have stock delivered within six or seven days of order. Dean Barkhuizen, Mustek`s MD, agrees on the delivery time, but notes that in a slow economy it is easier to have stock on hand waiting to be shipped – the real test will be when things pick up again.

Barkhuizen also notes that with good forecasting it is possible to reduce most painful stock situations caused by swinging exchange rates, but not always. “Nevertheless, one can normally balance things out when the rate swings the other way.”

In the works at AMD is a new potential thorn in Intel`s side in 2003. The company is about to release a new 64-bit processor. So is Intel, but the AMD chip will not only handle new 64-bit applications but, according to Mann, will also allow legacy 32-bit applications and operating systems to run without changes. “Intel doesn`t have that feature,” Mann adds, “and is locking users of the new chip into a narrow band of available 64-bit software.”

There is already market talk about Dell offering the AMD processors in its computers. However, Dell`s Hancock says the company is an Intel partner and has no news to share on the AMD front. Barkhuizen also says Mustek is not planning any products based on the AMD processors. Given that AMD`s CEO has noted that there is more support for the 64-bit chip than for any of the company`s previous processors, who knows what may happen?

Downturn or increased competition, Intel is still churning out new products and the company is playing a leading role as a component producer for the networking and wireless communications markets – and as a tough competitor. Whatever challenges the real new economy may bring to the company, Intel SA has demonstrated its commitment to the local economy and community – and that has to create some good karma.