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Intel, RealNetworks strike deal

Intel licenses video compression technology to a Microsoft rival, in a pact that could also spur demand for high-end chips.

PALM SPRINGS, California--Intel has announced that it is licensing video compression technology to software maker RealNetworks, in a pact that could spur demand for its high-end chips while further calling into question its de facto alliance with RealNetworks rival Microsoft.

Intel software will be incorporated into the Seattle company's upcoming streaming product, RealSystem G2, now in beta testing and scheduled to ship within 30 days, the company said at an Intel confab here.

Streaming software delivers audio or video content over the Web even as it is being replayed, unlike earlier Internet multimedia files, which had to be downloaded in their entirety before they could be opened.

At a press conference today at the Intel Developer Forum, RealNetworks CEO Rob Glaser and Intel vice president Pat Gelsinger announced technology that will improve streaming video on the Internet.

RealNetworks stock soared more than 29 percent this morning following the announcement. RealNetworks' stock jumped as high as 25.3750 in early trading, up from its close of 19.6250 yesterday.

As part of the agreement, Intel "will work with RealNetworks to promote and market the technology to Web media authors," the companies said.

For broadcasters, the "combination of Intel Streaming Web Video software and RealSystem G2 enables up to four times faster video encoding (creation) than previous streaming media delivery systems," the companies said. Intel and RealNetworks claim that what used to require multiple computers can be done with one.

RealNetworks' RealSystem G2 technology enables high quality audio and video on the Internet and corporate intranets. A new music codec (coder-decoder) technology provides a high quality sound for dial-up users, and new "postfiltering" capabilities create smoother video images, RealNetworks said.

Licensing compression software to RealNetworks fits with Intel's agenda of encouraging software makers to develop products that tap the computing power of its high-end chips. Of late, consumers haven't seen the need to buy 400- and 450-MHz Pentium II chips because midrange processors possess all the power they need for most desktop applications.

Simultaneously, the agreement asserts the company's independence from the Redmond, Washington, software giant, which has recently seemed to be the senior partner in the "Wintel" duopoly. As recent reports of the Microsoft-DOJ antitrust case reveal, internal Intel memos allege that Microsoft pressured Intel to drop certain Internet-related projects that conflicted with the software giant's own agenda.

RealNetworks has also been at odds with Microsoft. This past summer, Glaser, a former Microsoft executive, alleged in Congressional testimony that Microsoft's Windows Media Player "breaks" RealNetworks' RealPlayer software.

Both Intel and Real Networks tried to play down the impact the deal would have on Microsoft. Executives from both companies stated that the two began to work on an improved RealNetworks player utilizing Intel video technology almost a year ago. The exact blend of Intel technology that is subject to the deal was actually put together with this deal in mind.

Neither Glaser nor Intel recalled when an exact license was signed, but Glaser indicated it took place months ago. Glaser also said that has known about the collaboration.

Intel executives, although they would not categorically state whether Microsoft knew about the project, or whether they have a similar project with Microsoft, reiterated that the license was non exclusive.

From Microsoft's standpoint, the company's relationship with Real Networks has gone downhill since an initial spirit of cooperation took hold in the aftermath of a 10 percent investment by the Redmond, Washington-based software company over a year ago. The Intel relationship will have little effect on Microsoft's own efforts, executives said.

"Things didn't turn out the way we had planned [with Real Networks]," said Gary Schare, lead product manager at Microsoft for Windows media technologies. "The relationship is not exactly a good one at this point, though we treat them as we would any other ISV [independent software vendor].

"As time went on, it became clear they didn't want to be compatible with Windows," he said.

Glaser also seemed to back down from his statements about Microsoft since his senate testimony months ago. "People shouldn't confuse a public policy issue with the practical standpoint that we have hundreds of thousands of users."

Financial details were not disclosed but a source at Intel said that they don't give this away for free but this deal "isn't a pennies and dollars" deal. Instead, it is aimed at expanding users.

Intel is an investor in CNET: The Computer Network.

Kurt Oeler reported from San Francisco; Michael Kanellos reported from Palm Springs. Paul Festa and Ben Heskett contributed to this report.