This "Monday Note" from Gass?e is a great lesson learned in being willing to disrupt your own business:
"At the end of the day, there was a chip that they were interested in that they wanted to pay a certain price for and not a nickel more and that price was below our forecasted cost. I couldn?t see it. It wasn?t one of these things you can make up on volume. And in hindsight, the forecasted cost was wrong and the volume was 100x what anyone thought."
I think?Gass?e hits this right on the head:
Intel is a prisoner of its x86 profit model and Wall Street?s expectations. It?s dominant position in the x86 space give Intel the pricing power to command high margins. There?s no such thing in the competitive ARM space, prices are lower. Even factoring in the lower inherent cost of the somewhat simpler devices (simpler for the time being; they?ll inevitably grow more complex), the profit-per-ARM chip is too thin to sustain Intel?s business model.
By trying to protect or preserve the margins of the current products (x86 processors), Intel missed one of the opportunities of a generation to own the mobile processor market for iOS devices (and possibly for a lot more than that).
It seems astonishing in hindsight, but it had to be easy to overlook this opportunity back then.? I think it is instructive that for a company with Intel's breadth, it might make sense to dip toes into new markets even if you can't see how big they'll get.