Intel's mantra: Let's make a deal

The chipmaker's pact with Skype highlights how exclusive content and software can outweigh technology or performance.

Would you avoid buying a PC with an Advanced Micro Devices chip inside because it wouldn't let you host an Internet conference call with six of your friends?

Chip giant Intel is betting that at least some people would. Last week, Intel cut a deal with voice over Internet Protocol provider Skype that calls for the VoIP company to provide advanced conference-calling features exclusively on PCs that run Intel chips. As long as the deal is in place, it could effectively keep customers who want to take advantage of multiperson conference calls from going with AMD-based machines.

Though few would argue that a niche feature like that is going to be a deal breaker for most PC buyers, the importance of the Skype-Intel alliance goes well beyond VoIP conferencing. Indeed, it's the latest, and certainly most prominent, example of Intel's new take on marketing: Lock in software partners as well as the PC makers.

Intel executives have talked at length over the past few years about moving past a marketing strategy that emphasizes chip speeds and power above all else. Paul Otellini, now Intel's chief executive, got the new effort rolling in 1999 when, as executive vice president and general manager of the Intel Architecture Group, he created operating groups that focused on developing software and finding new uses for Intel's products, said Bill Kircos, an Intel spokesman.

Expect more of these exclusive pacts as Intel takes a brass-knuckles approach to its long-running feud with AMD, particularly as Intel's Viiv platform strategy of bundling home-entertainment software with its chips shifts into high gear over the next few months.

Intel executives believe they can use their considerable software resources to improve the performance of processing-intensive applications such as VoIP and home entertainment by working with software application developers to help them understand how Intel's chips process data.

In the process, moves like the Skype deal, which will run for a limited but undisclosed period of time, are a way to block AMD from landing customers who want to use applications such as Skype's 10-user conferencing.

Not surprisingly, AMD is already crying foul. AMD officials claim this is just another example of Intel using its sheer size to decide where AMD is allowed to compete, reinforcing the notion that Intel doesn't play fair. AMD charged in a 2005 antitrust compliant that Intel uses its marketing programs in a selective manner to punish companies who have used AMD's chips, or to reward companies like Dell who have cut exclusive deals with Intel--claims Intel has strongly denied.

Performance in the eye of the beholder
In the past, Intel has set its products apart and improved the performance of applications such as games by adding new hardware instructions to its chips, said Kevin Krewell, editor in chief of The Microprocessor Report.

But there are no specific instructions in Intel's current Pentium D or Core Duo chips that enhance the performance of VoIP applications, an Intel representative said. Skype is using an operation called "Get CPU ID" to identify the type of processor running on the PC. The Skype software has been preset to only accept Intel's chips as having the performance necessary to host conference calls of more than five people, the representative said.

Almost all applications running on any PC perform the Get CPU ID operation as the system boots, said Dean McCarron, principal analyst with Mercury Research. That operation determines what type of processor is in the system and what performance features are available to the application, he said.

Critics contend that if there are no instructions dedicated to VoIP applications in Intel's chips, it's unlikely that Intel's dual-core chips are demonstrably more powerful than AMD's when it comes to hosting VoIP conference calls. In fact, third-party reviewers gave AMD

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