Although Intel's networking history spans two decades, it is only over the last two years that the chip giant has tried to become a major player in the networking and communications arena.
But while the microprocessor has been the main driver behind Intel's success, the supplier was also, in fact, a codeveloper of the Ethernet standard with Digital Equipment and Xerox in 1979.
And its networking communications group, which was started in 1990, now has the same level of importance as the desktops and server divisions.
It delivered its first product in the shape of 10 megabit Ethernet adapters in 1991, followed later by print servers, and Reinier Tuinzing, director of strategic marketing for Intel's networking communications group, says the business is now worth $1 billion.
"Zero to a billion in ten years is not bad for a startup," he adds.
But Danny Briere, an analyst at TeleChoice, points out that Intel has to reinvent itself because the iron grip it has on the chip market is going to wither if it does not make itself indispensable across a broader line of services.
"Specialty chips are going to really take off in the next decade and it's not a foregone conclusion that Intel is going to get a lion share of that market. It is thus making itself into a broader provider, pursuing network services, applications support etc. Is it going to step on others' feet? You bet. But is that going to hurt Intel? Not one bit," he claims.
And the Gartner Group's Armstrong agrees that Intel is in quite a strong position.
"I think in relative terms, Intel is successful. It's not the network market leader, but Intel has made significant improvements in the marketplace, especially in the last two years because it has focused on the right technology," he says.
And while Cisco, Nortel, 3Com and Lucent remain the market leaders, Intel is becoming a larger player.
"Intel has a chance to enhance its position. It's well capitalised to enhance its position and has been doing just that. Over the last two years, it has been specifically involved in the networking market and has aggressively moved forward beyond the desktop and into the backbone to provide enterprise solutions to customers," Armstrong continues.
He adds that the firm has added a significant amount of product to its lineup via acquisitions, has purchased small and home office technologies and bought Shiva to enhance its remote access line up.
"It is moving into the network processor space and overall appears to be committed to the network market. It created a networking group and the head of the group reports directly to Craig Barrett, Intel's chief executive. It's a serious approach to their overall business plan," he explains.
And Intel has spent about $3 billion over the last few years to try and boost its networking presence, making investments in more than 250 companies, including Broadcom, Proxim, and Rapid Logic. This year's big deal, the $2.2 billion acquisition of Level One, was, in fact, the largest in the company's history.
Tuinzing explains: "This was part of our overall investment strategy of moving into the networking industry by offering increased bandwidth and functionality through silicon integration".
Intel also quietly took over Gigabit Ethernet vendor, XLNT, rather than continue to pour venture capital into the switch maker to plug holes in its strategy.
John Armstrong, an analyst with Dataquest, says: "Intel already has some solutions and the technology it has acquired from XLNT is fairly complementary. XLNT has focused on a fault tolerant architecture, which resonated with some people, but the company is fairly low key."
He adds that it made sense for Intel to buy the company rather than continuing to invest in it because "as an investor, it didn't have as much control as if it owned the company. Now Intel can add the XLNT design staff".
Most recently, Intel also said it would acquire Dialogic for approximately $780 million to expand its server business. The Dialogic deal continues a long term strategy to add communications oriented components to its roster of computer chips and Intel hopes to use Dialogic's hardware and software to spur the use of server based voice applications over the Internet.
Tuinzing claims: "The voice-data convergence is a phenomena we see happening" and says that Intel plans to target its branded offerings at the small to medium business arena.
"We don't play with an Intel brand in that area, but we will provide the building blocks, whether that the Intel architecture or its silicon solutions or switches for wide area network (Wan) connectivity," he explains.
Intel is also trying to come up with standards based technology that will support its attempts to move into higher bandwidth networking.
The first main area of focus is developing silicon communication building blocks for the telecoms and data market. The second is expanding into the home networking area, and the third is providing corporate connectivity in the local area network (Lan) and network interface card (NIC) markets.
The fourth initiative is looking at plumbing, which includes hubs, switches and routers and providing access to the Internet and to the infrastructure in the buildings.
While Tuinzing admits that the home networking market is small today, he believes it will grow to be very big in future. And according to Gartner Group, there will be 17 million US homes with multiple PCs this year, with the number expected to reach 26 million over the next four years.
"Home networking is a very exciting area for Intel to bring its silicon expertise, manufacturing efficiency and networking capability. Intel has a vision of one billion connected PCs in the next decade. Simple, affordable home networks are an essential step and necessary component towards realising this vision," he claims.
The firm's first home networking products enable consumers to connect multiple PCs over existing phone lines and via wireless networks.
"We are providing the means of connecting multiple devices - today's computers and tomorrow's, including some sort of handheld computing devices. Everyone wants to be connected, totally connected all the time - where and when we want, that's the challenge," Tuinzing says But he also attests that Intel goes through a very extensive evaluation cycle when licensing, acquiring or developing technology.
"We have been focused on silicon innovations, providing the solution as opposed to the pieces. We don't go up into the big iron arena, that's not our proficiency, not ours to build. We work through our distributors and resellers, not a direct sales force selling," he explains.
He points out that connectivity products, servers, workstations, desktops and mobile devices are all based on a common silicon platform and provide a common interface for customers. For example, he says, IT managers with 10,000 PCs now only need one driver to connect them to a network .
"The configuration is much easier because it is the same - the same look and feel, the same driver. And instead of carrying 15 diskettes around its just one. We take the mystery out of networking. We provide the end to end solutions not individual products to make it simple," he says.
And he adds: "This is an incredible time for everyone in the business because history is happening as voice-data comes together. We've only scratched the tip of the iceberg. Five years from now, ten years form now, it will be radically different." "For the first time, I believe that the voice-data convergence is going to happen. In five years grabbing hold, then another five years to build out and become mainstream," he concludes.
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