Intel acquisitions fortify future network role

When Intel demonstrated its Bluetooth wireless products last month, the firm was doing more than showing off another leading-edge technology - it was once again bolstering its rapidly developing status as a major player for small, midsize and even enterprise business customers.

In the past five months, the chip giant has spent more than $2.15 billion to buy five companies, fortifying its virtual private network (VPN), IP telephony and network management technologies with acquisitions such as Ipivot's e-commerce management equipment, DSP Communication's wireless chipsets and software, and Parity's software for IP telephony applications.

Intel is also playing a larger role in the network security arena. Most recently, it announced a partnership that observers called significant with Check Point Software, one of the top five Internet security vendors worldwide, according to research firm International Data Corp. (IDC) estimates.

Intel's strategic partnerships and product offerings are helping it make a bigger mark on not only the PCs, workstations and servers its chips inhabit, but also the networks to which they are connected. The bottom line: Intel's business and technology strategies will drive demand for its high-end chips and help prevent commoditization for the company's other products, including network devices, say industry observers.

"Intel has a pretty good size network division, and it has a number of products that use various security functions to add value to those network products," says Abner Germanow, a senior analyst with IDC in Framingham, Mass. Germanow says Intel's strategy of incorporating high-level features into otherwise simple products is shrewd. The strategy allows the company to avoid falling prey to the normal price declines that affect those markets.

Additionally, he notes, Intel's contributions give the company power over areas it would otherwise not have access to, particularly with regard to security and e-commerce.

With agreements such as the one with Check Point, which will combine Check Point's Secure Virtual Network firewall software with Intel's IX programmable silicon architecture, Intel will in the future drive security into new specialized chips and chipsets for network products. The moves not only give Intel access to the network security market, but also more control over it.

Beyond network security, Intel announced the following network-related products since August 1999:

A toolset for simplifying deployment of VPN clients.

Software for managing and integrating remote access users.

A fast Ethernet controller for embedded applications.

A line of products to help companies develop security for their networks.

A manageable switch product.

Intel also announced it would combine its IX technology with Nortel's OpenIP software for network device design.

From Intel's point of view, its expanding role in the network and network security market is a natural progression.

Len Rand, Intel's general manager for IX Architecture operations, says that as networked PCs continue to grow in importance, so will network equipment for Intel. Rand says Internet-related technology, particularly e-commerce, will be a focus for Intel over the coming year as the company rolls out new technologies. Just recently, Intel teamed with RealNetworks to simplify content streaming for business presentations.

That kind of diversification will help Intel ensure stability in a market where companies' products can quickly become obsolete, or cheap commodities, observers say.

"Intel not only is playing in the performance game of making faster, cheaper and better chips, it is also adding value around those chips to ensure its long-term success as a company," says John Dunkle, president of Workgroup Strategic Services, in Portsmouth, N.H. Dunkle points to manageability and standards initiatives, as well as acquisitions that Intel has made over the past year, as good examples. The Dialogic acquisition, for instance, was not only a boost to Intel's technology holdings, but also a step forward in its effort to promote computer telephony. For end users, that should mean more integrated capabilities on the desktop.

Intel's expanding role should help users in the long run, says Dunkle, who views the company's work to integrate its technology with industry leaders as an avenue to better products.

One challenge Intel may need to address in the coming year is that end users don't yet recognize the company as significant beyond the chip arena, probably because the technology is often embedded. In the small to midsize business market, the consequences may be less harmful than in the enterprise market, where brand name counts.

"When I think of networks, I don't think of Intel," says Jim Prevo, chief information officer at Green Mountain Coffee in Waterbury, Vt. "And that's probably because we tend to look at the market as byproducts - we used to buy network cards, but now they are embedded on the desktop."

As for the coming year, Intel plans to deliver more programmable silicon that will make its way onto and into everything from carrier-class cable concentrators to high-end routers and ATM switches, says Mark Christensen, vice president and general manager of Intel's network communications group. "We want to make the PC and server architecture ready for the next generation of applications, and that increasingly has to do with e-business," he says.o