Thinking Outside The Box

The company whose branding campaign, "Intel Inside," once pointed up the fact that their products were the brains of PCs and appliances has had a change of heart.

Intel has decided it wants to be the outside of the box, too. Intel's new Web appliance strategy, announced today at CES in Las Vegas, intends to make Intel into an appliance manufacturer.

Since launching a Web hosting business last year called Intel Online Services, Intel's mission has been to use its deep pockets to enter new business markets.

In a recent interview with The Industry Standard, Gerry Parker, executive VP with Intel, described Intel's efforts to launch new ventures. "The charter from Andy (Grove) and Craig (Barrett) was to start a new business - any new business. Just don't annoy our customers by selling branded PCs and don't get into anything too far afield, like the car rental business."

Today's announcement isn't the first time Intel has introduced branded devices.

Most recently, it introduced a microscope with Mattel for the consumer toy market. But this is the closest Intel has come to competing directly with its customers. The machines will focus on tying telephony and Internet access into one machine. According to Intel, the boxes will run on Linux. The group is also introducing set-top boxes for interactive TV. The first customers for Intel's products will include companies like Pacific Bell, for its DSL products, and cable companies, who want to add interactive TV and Internet access to their services.

The Home Products Group began in August 1998 with the desire to do something in the home appliance space. So far, the group has inked deals with Nokia to work on digital TV for Europe, Hughes Network Systems on satellite receivers, and has inked deals with service providers like US West and Pacific Century to upgrade China's cable plant.

But Intel, which has studiously avoided selling self-branded PCs so as to avoid competing with PC-maker customers like Compaq and Gateway, denies that there is potential conflict with its traditional appliance-making customers. "It's pretty well cast in stone that we do not sell Intel-branded PCs," says Claude Leglise, VP of Intel Architecture Business Group and general manager of the Home Products Group. "We look at the Web appliances segment as a new opportunity to grow; we're selling to people we've never sold to before."

PC makers, Leglise adds, are changing, and Intel is too. "This is like Compaq and Gateway becoming ISPs. Just like the PC makers who change incrementally by becoming ISPs, we are changing incrementally by becoming appliance makers."

"In the past 18 months we've completely refocused the company on the Internet.

We used to be focused on making building blocks for the PC industry, but now we're making building blocks for the Internet Economy," says Leglise.

"We've been making stuff for networks, telcos and getting into the hosting business. This is just another piece of that. We still have an unqualified love for the PC but the world is changing, and we're going to change with it."

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