Intel Scoffs at 'Post-PC' Computing, but Prepares

FRAMINGHAM (04/28/2000) - Intel Corp. executives may dismiss the notion of a "post-PC era," but in their six-hour briefing yesterday with New York financial analysts, their focus was sharply trained on e-business growth areas far beyond the PC market.

Intel Chairman Andy Grove repeated his latest corporate mantra that "the Internet runs on Silicon" and said Intel must "follow the bits" wherever they take the $30 billion semiconductor giant. "We are in the midst of a fairly sizable strategic transformation," he said.

The trend toward Internet computing and increasing use of non-PC devices is driving Intel to figure out ways to slip its silicon into everything from cell phone chip sets and Internet appliances to networking and communications products, flash memory, wireless and mobile devices, handheld computers and its traditional range of PC and server platforms.

This year, for example, Intel will invest more than $100 million and dedicate 1,000 employees in a range of electronic-business products and services aimed at dot-coms and other e-commerce businesses.

The company has so far opened two new data centers to offer application hosting and other e-commerce services and will have 10 running by year's end, Barrett said. The company will also spend $6 billion this year on a wafer fabrication and assembly testing facility to try to resolve processor supply problems that have plagued it for the past year.

"They've given themselves more running room" with a broader electronic-business strategy, said David Wu, directory of equity research at San Francisco-based ABN Amro Inc. "Their old business is still growing, but the big boost for the future will come from the Internet. Of course, their success or failure will be a much more speedy and observable event."

Investing in Internet economy companies is also a growing part of the Intel agenda. In the past several months, the company has spent $7.5 billion on acquisitions and invested $750 million in more than 125 start-up companies.

Other areas where Intel is now diversifying its resources and investments beyond its traditional stronghold in PCs and servers include the following:

The e-business data center hosting business, which is expected to grow to $14 billion worldwide by 2003.

Converged voice and data networking, which Intel estimates will be a $12 billion market within three years.

The cellular phone/wireless Internet market, which analysts predict will number 1 billion users by 2003, will require "a boat load of silicon," according to Intel CEO Craig Barrett - enough to make it the second largest chip set consumer after PCs.

The Web appliance business. Intel will launch its first volume product - a set-top box - in China later this year.

"The mix of business they talked about here is clearly where they want to go, but it's still less than 10 percent of their revenues," said Joseph Osha, director of global securities research at Merrill Lynch & Co. in New York. He and other analysts were generally upbeat about Intel's e-strategies, however.

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