Jeff, another excellent post, please talk more, you obviously know this business extremely well.
I wonder if you could give us your take on this article coming out in Monday's edition of IBD.
Thanks, Michael
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Cyrix's Gifts From Parent May Include Intel Secrets
Date: 12/8/97
Author: Russ Britt
The past might come back to haunt Intel Corp.
Rival Cyrix Corp. says it can tap into Intel's prized - and well-guarded - technology patents for the Pentium II processor. And market dominator Intel is powerless to do anything about it.
How is this possible? Well, Cyrix was acquired last month by National Semiconductor Corp. And National and Intel share a cross-licensing agreement that dates back to the '70s. It lets the two Santa Clara, Calif.-based chipmakers share each other's technology. The pact runs until June 2000.
The two were buddy-buddy because National hasn't made microprocessors for many years. Microprocessors - the brains of a computer -are Intel's stronghold and the reason it's the world's largest chipmaker.
Only two companies really challenge Intel in PC microprocessors. They are Advanced Micro Devices Inc. and Cyrix.
By becoming part of National, Cyrix gained access to Intel's patents. That means some technology for the Pentium II, including a new design that Intel hoped would distance it from its competitors, is fair game for Cyrix.
''I don't know if Intel thought of National as a microprocessor threat. Now they're not so sure,'' said Rich Belgard, a Saratoga, Calif.-based consultant on chip patents.
Cyrix and Sunnyvale, Calif.-based AMD both make a living developing chips similar to Intel's Pentium processors. All use Socket 7 architecture, which caters to the Pentium chip's square shape.
But Intel's successor to the Pentium, the Pentium II, is more rectangular and uses a so-called Slot One architecture. That's important for PC makers, because they must ''design in'' that architecture when making a new computer. AMD and Cyrix have gained in the market for lower-cost Pentiums that PC makers could easily use in place of Intel chips. So Intel has taken great pains to keep Slot One secret.
Cyrix is evaluating the new options its merger with National has dumped in its lap, says Steve Tobak, vice president of marketing. As yet, National still is shielding the Intel data.
But gaining access to that secret Intel technology ''is very doable,'' said Tobak. ''There are no (intellectual property) issues. It's just up to us to decide.''
Even with the data, Cyrix would have to leap some engineering hurdles to develop Slot One. Still, the data surely would help.
''We wouldn't have access to their data that say what Slot One is,'' said Kevin McDonough, senior vice president and general manager of Cyrix. ''We would have to engineer it ourselves. But we've done that in the past.''
Intel says the Pentium II's intellectual property remains safely secret.
True, Cyrix does have access to a number of Intel patents available under its cross-licensing agreement with National, says an Intel spokesman. But there also are several aspects of the Pentium II architecture that Intel has placed under the ''trade secret'' label. National or Cyrix can't get that information, says Intel.
There is enough protected technology to prevents Cyrix from making a meaningful Pentium II competitor, says Intel spokesman Howard High.
Analysts wonder. There is little to protect companies with cross-licensing agreements from having their technology borrowed, says Drew Peck, an analyst with Cowen & Co. in Boston.
'' 'Trade secrets' has been ephemeral,'' Peck said. ''It appears that National is in a pretty strong position from an intellectual-property view.''
Licensing agreements such as the National-Intel pact are common. From the industry's earliest days, as technology companies struggled to gain footing, they often made such pacts to encourage product development. In Silicon Valley, such pacts are a way of life and, to a degree, sacred.
And that might be Cyrix's biggest roadblock. National simply might not want to risk angering Intel.
Though National first announced plans to buy Cyrix in August, National still hasn't decided how much of Intel's technology it can - or will - share with Cyrix.
''Intel's a customer of ours. It's a complex situation,'' said a National spokesman.
Sources familiar with the situation say National is keeping a low profile about the licensing situation. The company might not want to risk ending the pact with Intel.
National is, however, developing computer systems that operate on a single chip, or just a few processors. Cyrix is key to those plans. And if National and Intel collide in the new computer-on-a-chip market, National might need a Pentium II alternative.
Patent consultant Belgard says he expects Intel to go to court if Cyrix or National use the technology-sharing pact to make competing products. The companies are familiar with courtrooms. Earlier this year, Cyrix sued Intel for patent infringement. The case is pending.
But taking advantage of the licensing agreement could give Cyrix a leg up on AMD, which has no such pact with Intel. AMD says it has no plans to adopt the Slot One architecture.
''Our position hasn't changed,'' said an AMD spokesman. ''We like Socket 7 through '98. That is going to be the way to go.''
There is the question of whether Cyrix really wants to make a Pentium II. Some PC makers have hesitated to adopt it because, at least for now, it locks them into one chip/Slot One supplier: Intel.
Some analysts say PC architecture could evolve quickly. If true, other chipmakers could skip the Pentium II/Slot One generation and lose little ground.
On the other hand, they say Intel's clout could make Slot One a standard for years to come. And market research firm International Data Corp. estimates Pentium II will have a third of the market this quarter - and sales just began in May. |
