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From today's WSJ on Intel's plans---------------------------->
Intel Sees Revenue Rising in Future
From Internet, Networking Ventures
By DEAN TAKAHASHI
Staff Reporter of THE WALL STREET JOURNAL
NEW YORK -- Touting its place in the fast-growing Internet
economy, Intel Corp. told analysts that new Internet services and
networking ventures could generate billions of dollars in new
revenue in a few years.
Craig Barrett, chief executive officer of the Santa Clara, Calif.,
chip company, said Intel is taking advantage of the rapid growth
of electronic commerce to position itself as the "building-block
supplier to the Internet economy." But in contrast to Intel's role as
a chip maker, the building blocks will consist of hardware and
software.
Andrew S. Grove, Intel's chairman, said
at the biannual analyst meeting that
Intel's new businesses present
opportunities similar to past upheavals
such as data processing in the 1970s and low-cost commodity
manufacturing in the 1980s.
"In this industry, it is like the duck that looks calm on the surface
and is paddling like heck underneath the surface," he said. "An
enormous re-engineering of business is going on below the water
line."
Mr. Barrett said the company's networking business has been
growing about 50% a year and should top $1 billion given the
pending acquisition of Level One Communications Corp. He said
that business could grow to several times that size in a few years
thanks to new initiatives in chips and systems that will tie together
data and voice networks.
And Gerhard Parker, a longtime manufacturing executive who
was appointed to head Intel's new business ventures last year,
unveiled the company's plan to create a major data-services
business known as Internet hosting. Intel will set up data centers
with thousands of powerful computers known as servers to
provide data processing, storage and other computing services
for companies that connect users to the Internet. Each center will
cost $50 million to $100 million and use 2,000 to 5,500 servers.
Intel itself will not become an Internet service provider, but it will
provide outsourcing services to those companies. Mr. Parker
said the new venture sprouted from Intel's relationships with
companies like Excite Inc. and will likely bring it into competition
with a diverse range of companies, from International Business
Machines Corp. to Electronic Data Systems Inc.
"It is a big opportunity, but I am not sure what advantage Intel has
over everyone else who wants to be in this business," said David
Wu, an analyst at ABN/Amro in San Francisco. "But it says a lot
when Intel puts someone as senior as Gerry Parker into that
position.
Intel can get serious about investing in new Internet businesses
because of the windfall from its microprocessors, which
accounted for 80% of revenue last year and all of the profit. Mr.
Parker said Intel started its own internal venture-capital fund,
which will spend $50 million in 1999, to finance new businesses
proposed by employees.
Intel also said electronic commerce is catching on quicker than
anyone expected. Its own e-commerce revenue is at $1 billion a
month and could hit $15 billion, or half of revenue, in 1999,
according to Sean Maloney, senior vice president of sales and
marketing. Mr. Maloney said that in two or three years about 90%
of Intel's revenue will come from e-commerce.
In other new business, Intel has begun to embrace information
appliances, or devices smaller than PCs that connect to the
Internet. Intel said it would introduce two new StrongArm
microprocessors next month, which would serve as the brains of
information appliances such as handheld computers and TV
set-top boxes.
In its core microprocessor business, Intel also has a variety of
new products in the works. Paul Otellini, executive vice president,
said the company will launch a 466-megahertz Celeron
microprocessor on Monday for the low end of the market. He also
said that Intel's portable chips would soon match the performance
of its chips for desktop computers.
Mr. Barrett said that Intel has begun shifting to lower-cost 0.18
micron manufacturing, which will help it deliver lower-cost
microprocessors with speeds reaching 600 megahertz in the
second half of 1999 and 700 megahertz in the first half of 2000.
The first 0.18 micron Pentium II mobile chips will go on sale later
this quarter, putting Intel ahead of competitors.
Most descriptions of the new businesses came after the close of
markets. In trading on the Nasdaq Stock Market Thursday, Intel's
stock rose $3.0623, or 5.2%, to $61.50.
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Not to start any rumor...but seems to me Exodus would make a great
acquisition for Intel<vbg>.
--Bill
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