Chips down for Intel
Nigel Powell
The filing last week of an antitrust suit against Intel Corporation by the US Federal Trade Commission may signal the end of an era, as the second of the once mighty "Wintel" duopoly joins Microsoft in a messy legal wrangle.
While most commentators are keen to distance the two court cases - citing the narrow scope of the Intel suit and the uncertainty of the outcome as crucial differences - there is little doubt that the case will have a knock on effect on the semiconductor market.
Intel's problems stretch some way beyond the court, however, as it fights an increasingly bitter war against cheap processor makers AMD and Cyrix. These two are now winning significant market share in the low-cost PC business.
As if that was not enough, at the high end of the spectrum the company has had to face delays to its new 64 bit Merced processor (now slated for delivery in 2000), creating the possibility that fast alternatives such as DEC's Alpha and Motorola's PowerPC G3 could gain important footholds in the high-powered computer market.
"The days when Intel could charge what it likes for its processors are ending," says Carl Howe, director of computing strategies at Forrester Research. "Our guess is that for the next few years they're going to have to slug it out at the low profit end of the business in order to survive."
One of the key players in any market upset is likely to be IBM, which is now beginning to flex its huge research muscle in some important areas. It recently announced a $ 100m investment in its core chip business which will let it make cheaper and more flexible customised processors, challenging not just Intel but other giants such as Texas Instruments.
IBM is also the joint developer of the potent new PowerPC G3 chip used in Apple computers, and it is an IBM factory which makes the processors that AMD and Cyrix design to sell as competitive products to the Pentium.
Ironically, for the consumer all this bad news turns out to be good news. The general slump in the price of semi conductor memory has meant that PCs with four times as much memory as two years ago now routinely ship at the same cost or less, and has also given rise to small Pounds 500 handheld computers which have enough memory to run software as sophisticated as their desktop cousins.
The improvement in specialist chips, such as digital signal processors which form the multimedia core of many of today's computers, is also leading to exciting new products such as intelligent mobile phones and set-top boxes to access the Web on television.
For the consumer, then, every cloud may have a silicon lining - but for Intel the story could have a less than happy ending. "Intel's main focus is on its Pentium processors, and they are finding it increasingly difficult to drive the general adoption of faster chips," says Howe. "Most software now runs just fine on standard 166Mhz Pentiums, so why upgrade? If buyers don't move up the market, Intel's profit and business plan fall apart."
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June 17, 1998 Wednesday
Sony teams up with Microsoft
JON HERSKOVITZ
TOKYO --- In a development that may signal a growing alliance between the two global giants, Sony Corp. and Microsoft Corp. have agreed to jointly develop interactive set-top boxes that will allow cable TV users to connect to the Internet.
The two companies are aiming to have the new boxes hit the market in mid-1999 and be equipped with Microsoft's Windows CE as the operating system, Sony said.
The two companies concluded a tie-up agreement in April, and their new set-top boxes are expected to be supplied to Tele-Communications Inc. and other cable operators in the U.S.
The boxes can accommodate video-on-demand, online shopping and other interactive services.
Microsoft chairman Bill Gates and Sony president Nobuyuki Idei said in an interview with the Nihon Keizai Shimbun that they expect their joint development program will help them seize the lead in the global digital home electronics market.
The two said once they complete the set-top box project, they are looking for other joint development projects to keep the alliance moving into the 21st century. The two are hoping to cooperate on such things as bringing Sony's movies, music and electronic games online with the help of Microsoft.
Idei told the paper the two decided to collaborate on projects in January when he met Gates at a gathering of the world's economic and political leaders in Davos, Switzerland.
The development comes on the heels of the announcement Monday that Microsoft was buying a 10% stake in the cable Internet access joint venture operated by Time Warner and MediaOne. Compaq Computer took an equal $ 212.5 million stake.
Sony returned to the personal computer market last year with the introduction of its Vaio series. Since introducing the Vaio series of notebook and desktop PCs last July, the notebook computer has become one of the leading sellers in the notebook class in Japan.
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