Intel Outside

Chipmaker moves on several networking fronts

Intel isnt just inside anymore.

Last week, the giant semiconductor company made news on three fronts: It introduced a smaller chip for controllers that it said will accelerate the acceptance of Gigabit Ethernet networking technology. It acquired VxTel for $550 million, gaining signal-conversion technology to carry both voice and data in packets over optical networks. And Chief Executive Craig Barrett vowed to keep investing heavily in products for the build-out of next-generation networks, saying, "You never save your way out of a recession."

Intels Pentium 4 inside personal computers may be using up most of the firms advertising budget, but Intel is outside, too, with new products for larger devices, including network equipment for the long-haul, metro and access markets. In fact, its networking products, appliances, consumer electronics and services accounted for $1.85 billion of its $8.7 billion fourth-quarter revenue.

And Barrett said the company will invest $12 billion in capital expansion and research and development in 2001.

At Intels semiannual Developer Forum, the company introduced its Gigabit Ethernet Controller, which can run at 10 megabits per second, 100 Mbps or 1 gigabit per second and is the size of a quarter. A controller relays information between a hosting center and hundreds of terminals.

Its the first time a company has put both the access layer and the physical layer onto a single chip, said Tim Dunn, general manager of Intels Local Area Network Access Division. "Were able to reduce the footprint by half and the power by half — it runs below 3 watts." The chip can go into mobile devices, servers, routers or switches, and doesnt need any special cooling or heat sinks. Intel will sell it to manufacturers such as Compaq Computer, Dell Computer, Juniper Networks, Lucent Technologies and Nortel Networks.

Dunn said Intel is more than a year ahead of its competitors, which are just starting to introduce multichip solutions. "This is our third-generation device," he said. Customers that have already invested in Intels software dont have to switch to adopt the new device. Intel will start sampling the device next week. Its designed to run over copper, but can work with optic fiber, too.

The end user will see quicker response time and better quality of service, Dunn said. Thats important to a midsize brokerage firm, for example, that needs second-by-second stock quotes. The same capacities can be reached by aggregating multiple pipes and platforms together, but eventually that becomes cumbersome. Dunn said Intels single-chip approach gets 10 times the performance of earlier models at about two times the cost.

Ethernet is the dominant technology in local area networks, where businesses have gravitated toward its low-cost, reliable way of linking all the machines to one another. As Ethernet gets faster — 1 Gbps today, and 10 Gbps and even 40 Gbps later — it may become the dominant technology in metro area and wide area networks, as well.

Chipmakers are on the verge of standardizing their integrated circuits so any vendor or carrier can buy them off the rack at low cost and be guaranteed theyll work reliably in any box. Intels entry into the system-on-a-chip network market is seen by some as a watershed event in the migration toward off-the-shelf products that can help new equipment makers compete with the big guns.

With its purchase of VxTel, Intel acquires the processing technology to carry voice in the same type of packets that carry data over a next-generation optical network, said Mark Christensen, vice president and general manager of Intels Network Communications Group. The VxTel platforms aim to be off-the-shelf products, speeding the time it takes for end users to get voice-over-Internet Protocol, voice-over-Asynchronous Transfer Mode, voice-over-cable or voice-over-Digital Subscriber Line. It lands the company squarely in the race to give carriers a way to carry both voice and data in packets, so they dont have to install parallel systems on their networks.

Service providers have been calling for equipment that has the intelligence to create services such as voiceconferencing or instant messaging on a single optical network, so they can raise the prices they charge end users. Intel, which has been working with VxTel for the past 10 months, will provide samples to equipment vendors soon and go into volume production late this year.

VxTel is the eighth acquisition for Christensens group, and the 16th for Intel in the past 12 months. "Now is a pretty good time to be doing acquisitions, with valuations having adjusted downward," Christensen said.

VxTel fills an important gap, Christensen said. If Intel had tried to develop the packet voice technology, "it would have taken us several years, and by the time we got to market, the market would have moved," he said.