To: VICTORIA GATE, MD who wrote (43298 ) 12/28/1997 6:20:00 PM From: Glenn D. Rudolph Respond to
Many startups now have Intel inside
Reuters Story - December 28, 1997 15:22
%US %BUS %MRG %DPR 9984.Q TWX AVID MSFT CNET ATHM RMBS TDDDF TDFX CYCH WAVO V%REUTER P%RTR
By Samuel Perry
SANTA CLARA, Calif., Dec 28 (Reuters) - Call it a prudent
insurance policy or a paranoid survival gambit.
Either way, Intel Corp., whose computer chips are the
brains of most personal computers sold around the world today,
has quietly invested a chunk of its roughly $8 billion cash
pile into scores of start-up companies in fledgling industries
ranging from online musical concerts to space-age graphics.
The world's largest semiconductor company has become a leading
force in Silicon Valley's venture capital community over the
last several years, making at least $500 million in investments
in more than 100 companies.
Many Silicon Valley investors consider that estimate
conservative, and even the head of Intel's 30-strong investment
and business development arm admits the pace of investing has
quickened dramatically in recent months.
"The transaction rate has doubled in the last two years as
we get more and more satisfied and confident in our
strategies," said Leslie Vadasz, Intel's senior vice president
and director of corporate business development.
While some recent investments involve classic acquisitions
-- like Intel's plan to acquire Chips & Technologies Inc. in a
$400 million deal that would be Intel's largest ever -- many
more involve small bets of several million dollars each for a
minority stake.
Unlike Chips & Technologies, which would add to the range
of Intel's core chipmaking business, many other investments are
in new industries, such as Internet-based media companies.
The investments underscore a push by Intel Chief Executive
Andy Grove -- whose recent book was titled "Only the Paranoid
Survive" -- to generate fresh demand for Intel's ever-faster
chips while also searching for entirely new opportunities.
About 80 percent of Intel investments are now in entirely
new market segments, Vadasz reckons. These mostly involve
rivate companies working with promising technologies such as
interactive, multimedia discussion groups on the Internet.
An example of those are virtual communities, in which
people can participate in multidimensional communities by
assuming on-screen identities as make-believe characters known
as avatars. Intel has invested in two such concerns.
An Intel vice president, Michael Maerz, even left the
prosperous chipmaker to head up one of these, The Palace, in
which Intel has invested with Softbank and Warner
Music Group, a Time Warner division.
"We don't have any business selling virtual community
applications, but it became obvious that we should help
companies in this space," Vadasz said. "This could really
create more demand for high performance PCs."
Other areas range from electronic commerce to new
technologies for offering concerts on a PC.
Intel also has shown interest in graphics visualization and
the entertainment industry. Last spring, it invested $14.75
million in video production equipment company Avid Technologies
Inc.
Tony Perkins, editor in chief of Red Herring, a magazine
covering the high tech venture capital industry, said Intel and
other top technology companies such as Microsoft Corp.
are increasingly savvy private investors.
"They are able to be very competitive as they have other
resources they can offer these companies," he said. "Investing
in other companies is more strategically necessary and
important nowadays than it used to be."
Some analysts regard it as a form of research and
development on the cheap, since it provides access to nimble
startups working on emerging technologies without having to
bankroll the projects directly. Potential capital appreciation
is an added attraction.
Besides equipment and know-how, like that which Intel is
providing to Hollywood through an advanced multimedia lab
opened last year at the Creative Artists Agency, Intel can
provide other benefits.
Over the current year, Intel has put a significant portion
of its cooperative advertising budget with PC makers under its
"Intel Inside" branding program into advertising on the World
Wide Web in a deal that by some calculations could inject
around $200 million into Internet startups.
Despite the buying binge, venture capitalists regard Intel
as a hard bargainer that routinely expects -- and gets --
preferential pricing. Vadasz said he tells his team not to get
too carried away with the future.
"I keep telling people don't fall in love with the
technology,'" Vadasz said. "At the end of the day, you invest
in people rather than the ideas."
-- (sam.perryreuters.com, Palo Alto Bureau 415 846 5400)
PARTIAL LIST OF FIRMS WITH INTEL FUNDING
Company Business
CNET Inc. Media, Web publishing
Palace Inc. Internet chat, communities
OnLive Technologies, Internet chat, communities
AtHome Broadband Internet access
Rambus Memory chip technology
3D Labs Inc. Specialty graphics chips
3Dfx Interactive Specialty graphics
Cybercash Electronic commerce
Wavephore Inc. Data transmission
