Tenchusatsu and all, Article...Dialogic Purchase Latest Move -- Intel aims to pave the road to voice, data convergence..
June 8, 1999
COMPUTER RESELLER NEWS : Santa Clara, Calif. - By paying $780 million to acquire computer-telephony components maker Dialogic Corp., Intel Corp. continues to transform itself into more than a giant in the PC processor business.
"Our intention is to be a major player in the converged networking infrastructure, both in the voice and datacom industries," said John Miner, vice president and general manager of the enterprise server group at Intel, based here.
Intel Chief Executive and President Craig Barrett agreed: "We want to be the building-block supplier to the Internet economy."
Intel executives said they are focusing on components for the Internet, including client PCs, computing appliances, networking devices, servers and a new range of solutions and services. The company also unveiled plans to move into Web hosting.
Intel's acquisition of Parsippany, N.J.-based Dialogic follows its move in March to buy Level One Communications Inc., a Sacramento, Calif.-based components supplier for telecom and networking applications. The $2.2 billion deal was the largest single acquisition in Intel's history. Intel also boosted its networking business with the acquisition of Shiva Corp., a Bedford, Mass.-based specialist in remote access and virtual private network (VPN) products.
And in May, Intel launched its next-generation StrongArm chip technology, which is targeted at handhelds, Internet access devices and Internet backbone technology such as networking devices. On the service side, Intel unveiled plans to team up with Excite Inc., Redwood City, Calif., to develop an online shopping service.
"It's not your father's Intel anymore," said Mel Thomsen, senior analyst at MicroDesign Resources, Sebastopol, Calif. "It's rapidly becoming a very different company."
Thomsen predicts in two to five years Intel's revenue stream will be much less dependent on microprocessors. That portion of the business should drop to 50 percent from roughly 80 percent today, he said. Providing semiconductors for communications technologies will play a larger role in Intel's business, Thomsen said.
"That's not to say they'll back away from or scale down their microprocessors," Thomsen said. "It's just that their growth will be greater in other areas, so the company won't be so dependent on microprocessors and PC sales in the future."
With good reason: Plummeting desktop PC prices are forcing Intel to examine other revenue sources, analysts said.
"If you look at the market where Intel made its mark, which is processors for desktop and mobile PCs, the handwriting's been on the wall for a year or two," said Nathan Brookwood, analyst at Insight 64, Saratoga, Calif. "That market really has slowed down in terms of revenue growth potential. "
Besides, many software applications cannot take advantage of the speed and power Intel's chips can offer, Brookwood said.
"Intel needs to find alternative opportunities-both to sell microprocessors and also to sell more products with semiconductor content-and one of those [opportunities] is networking," he said. "A lot of silicon is going into the communications infrastructure."
As for Intel's move into Web hosting and its Dialogic acquisition, both were motivated by Intel's goal of strengthening its presence in the server market, where it can command higher prices for its processors, he said.
Audra Menuey, president of MAT Microsystems, a VAR in Brea, Calif., said Intel's efforts are helping advance the acceptance of new technologies. "I think they're doing what's necessary to keep the industry moving. I think it's another example of why they're giants in this industry," she said.
C.J. Wang, president and chief executive of Long Island Computer Corp., a Syosset, N.Y.-based VAR, said Intel's move into Web hosting and its new remote services center opens up new business for VARs. Launched in February, the Intel InBusiness Remote Services Center gives VARs the ability to remotely support their customers' networks.
While Intel needs to diversify and address changes in the market, the company faces the risk of losing focus. Intel already is showing signs of stress with its complex line of processors, said Rob Enderle, director of desktop and mobile technology at Giga Information Group, Cambridge, Mass.
"One of the big challenges for a company going through this kind of transition is to keep things simple so they can be managed. They've shown a tendency to go the other way and allow excess complexity into the company, which can be a real problem," he said.
Warren S. Hersch contributed to this story.
Intel Calls On Dialogic
-Intel to pay $780 million; deal closes in third quarter.
- Dialogic CEO Howard Bubb to become VP of Intel's Enterprise Server Group
- Bubb remains president of Dialogic, which will be a wholly owned subsidiary.
- Dialogic retains partnership with Microsoft.
Expanding Its Horizons
Networking and Communications
March 1999: Intel moved to acquire Level One Communications Inc., a Sacramento, Calif.-based supplier of components for high-speed telecommunications and networking applications. The $2.2 billion deal is the largest single acquisition in Intel's history.
June 1999: Intel announced a $780 million deal to acquire Dialogic Corp., Parsippany, N.J., a computer-telephony systems and component maker.
E-Commerce
April 1999: Intel unveiled plans to team up with Excite Inc., Redwood City, Calif., to develop an online shopping service. The company also plans to move into the Web-hosting market by building farms of Internet data centers providing a variety of services.
By Marcia Savage
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