Why Intel's betting its chips on 4G

Intel's participation in a new consortium is part of a longer-term bet on the future of the technology landscape.

At first blush, it sounds as if Intel's throwing good money after bad. After all, why pay $1 billion to join a consortium which has "squabble-fest" written all over it?

4G has been a slow train coming and the latest attempt by Sprint and Clearwire to speed the transition could easily fall hostage to all the big egos with seats on the board. Lest we forget, Sprint and Clearwire went their separate ways last November, only months after announcing plans for a Wi-Fi partnership. (My colleague Maggie Reardon has a great take on the challenges facing the reconstituted Clearwire you should check out.)

But Intel is one of the lucky companies that can afford to pay to play and not wince if a bet comes a cropper. Obviously, these things are impossible to handicap, but Intel's participation is part of a longer-term bet on the future of the technology landscape. A quick recap, first:

•  After investing $620 million in Clearwire, Intel put up another $1 billion as part of a consortium agreement to merge Clearwire and Sprint WiMax carriers into a single entity. (In addition to Intel, the list of participants includes Sprint, Clearwire, Google, Time Warner Cable, Comcast, and Bright House Networks--in for a combined $3.2 billion.

•  Like the earlier deal it struck with Clearwire, Intel signed onto a revenue sharing deal. So if the business takes off, Intel reaps a windfall.

•  We're not talking about your garden variety start-up. The reconstituted Clearwire will have a value of approximately $14.5 billion.

•  Get ready for keen competition between WiMax and long-term evolution standards in the next several months. (The GSM association supports LTE.)

Why push WiMax? At this point, the only question would be why not push WiMax?

Intel already has put money into 16 WiMax-related companies. The size of the latest deal may have made for quite the headline, but Intel's reaching back into a familiar playbook. The company's previously helped fund a number of technology projects--including Itanium and CNET Networks, among others--the idea being to feed demand for its chips.

From Intel's perspective, anything that increases the size of the computer user universe translates into good news. So if Clearwire works out according to plan, Intel will get to sell more Atom processors in mobile devices and consumer electronics.

At that point, $1.62 billion may look like the savviest tech investment since Rupert Murdoch stole MySpace for $580 million.

 

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