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Skystream, Hughes deals point Intel toward satellites

In its quest to bring broadband technologies to the mainstream, Intel announces an equity investment in SkyStream and an expansion of its relationship with Hughes Network Systems.

In its quest to bring broadband technologies to the mainstream, Intel today announced an equity investment in SkyStream and an expansion of its relationship with Hughes Network Systems.

Satellite technology lies at the base of both deals, a technology that received a significant boost earlier today when America Online announced it will invest $1.5 billion in Hughes, one of the prime movers in the satellite world. SkyStream specializes in networking technology that allows traditional broadcasters, as well as ISPs and portal sites, to deliver data and Internet content over space-based TV signals.

Meanwhile, under the Hughes deal, the two companies will collaborate on satellite TV set-top boxes. In May, Hughes selected an Intel Pentium MMX chip for its "AOL TV" set-top boxes. More will now follow. Intel will also license Hughes' DirecTV technology and incorporate it into future products, the companies said.

Although a potentially elegant solution that conserves bandwidth, satellite has often been positioned as less viable option than cable or Digital Subscriber Line (DSL) for high speed Internet access for a variety of technical and marketing reasons. Cable and DSL aren't perfect, but many services, such as two-way communication, will arrive there first. Still, AOL's push into the area gives satellite a shot in the arm, according to some analysts.

"[The AOL investment] provides more credibility for satellite as a viable means to deliver content," said Sean Badding, a senior analyst at satellite industry consulting firm The Carmel Group.

Cable and satellite are also not exclusive, said Jim Olson, chief executive of SkyStream. Approximately 85 percent of cable programming travels partially on satellite.

The technology is also gaining the attention of a number of other Internet players. SkyStream is currently in talks with ISPs and major portal sites about their respective possible pushes into satellite delivery. "We're talking with the who's who of the Internet," he said. Traditional broadcasters, of course, see data transmission via satellite as a way to increase revenues while waiting for digital TV to come into vogue.

Terms of the Intel investment were not discussed, but Olson said that the investment came as part of SkyStream's third round of financing. An IPO hopefully will occur within a year, he said.

Intel looks for faster pipes
Expanding broadband capabilities has become one of Intel's chief obsessions and is increasingly the target of its business development group, which seeks to invest in those types of companies. Broadband is expected to lead to richer Internet content, which in turn Intel hopes will drive demand for more powerful processors and PCs. The rise in cheap PCs in recent years, say many observers, comes from the fact that few applications exist that require a high-performance PC.

The company has already made a number of investments in companies specializing in cable, DSL and satellite, including such high fliers as @Home (now called Excite@Home) and Copper Mountain.

"If there is any societal problem with computing, it is broadband," said Les Vadasz, senior vice president of corporate business development and head of Intel's venture capital fund in February. "I don't care it it's spaghetti. We are agnostic about what transport mechanism you have...There are a number of players we are involved in."

News.com's Corey Grice contributed to this report.