Wednesday January 3, 10:01 am Eastern Time
Forbes.com
Ten O'Clock Tech: Intel Joins The MP3 Chorus
By Arik Hesseldahl
Once there was a company called Intel that made computer chips and pretty much nothing else. But this company decided it wanted to do other things, like hosting Web sites and making sophisticated toys.
Now the world's biggest semiconductor company is entering one of the hottest consumer electronics product segments of the moment: digital audio. On Tuesday Intel (Nasdaq: INTC - news) unveiled its Pocket Concert player, a portable digital audio player that it says will let you take your music into the car, or play it over a home stereo system.
It was only a matter of time. When the Diamond Rio, the first portable MP3 player, hit the market, big manufacturers like Sony (NYSE: SNE - news), RCA and Samsung rushed to get in on the game with their own players. Intel already sells Web cameras, microscopes and Sound Morphers, all aimed at kids and all meant to make PCs more fun to play with. Could it be that one day, when you think of the Intel brand name, you don't think of chips but of consumer gadgets?
It's all part of a strategy to prop up demand for its PC chips and for other chips that it makes. Each Pocket Concert unit will contain 128 MB of Intel's flash memory chips--good enough, by the way, to store four hours of music, twice as much as the top-of-the-line Rio from SonicBlue (Nasdaq: SBLU - news). The Pocket Concert will sell for $299 and will start shipping next month.
But that's not the last we'll be hearing from Intel on the consumer electronics front. CEO Craig Barrett will talk extensively about Intel's vision of the ``extended PC'' in his speech at the Consumer Electronics Show this weekend. Barrett is expected to show other forthcoming Intel gadgets, among them a Web pad for around-the-house Web surfing and a ``chat pad'' for instant messaging.
If this were any other semiconductor company, you'd see it working alongside gadget-makers to develop the chips that power this year's must-have technology toys, not making the toys themselves. That's the way it usually works with chip companies like Motorola (NYSE: MOT - news), whose Dragonball chips are main processors inside the PalmPilot, or Texas Instruments (NYSE: TXN - news), whose digital signal processors (DSPs) show up in dozens of mobile phones.
Drooping PC sales and Intel's dashed earnings hopes for the previous year has it trying to fuel more demand to reverse the trend. But it has also been looking beyond the PC. Intel's StrongARM chip shows up in some versions of the PocketPC. It is also building a DSP chip, which it designed with help from Analog Devices (NYSE: ADI - news), to compete with Texas Instruments in the wireless phone market.
The fact is that there is no truly compelling reason to buy a new PC now, or upgrade one that was bought in the past two years or so. The blistering gigahertz-plus speeds of Intel's Pentiums, not to mention those of its competitor, Advanced Micro Devices (NYSE: AMD - news), don't mean much to consumers, especially since a PC with a 500 or 600 MHz processor probably runs just fine. Meanwhile, non-PC devices like Web pads and so-called information appliances, none of which are really bursting with Intel-made chips, have been getting a lot of hype. If you were Intel, you'd be worried too.
In 1994, multimedia-capable PCs opened consumers' eyes wide to what a PC could do. In 1998 and 1999, the Internet and unusually low retail PC prices did the same thing, and the sales boom lasted into 2000. Both attracted lots of new users and prompted many to upgrade to newer machines. But there's nothing new about PCs--not even digital audio--to generate another rush to buy new machines.
Somewhere in a basement or college dorm room, there's probably a new idea taking shape that, within two years, will make people want to buy newer, faster PCs and return a little color to Intel's earnings. But whatever that new idea is, it probably won't come from inside Intel. |
