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Dell drops Intergraph technology

The computer maker says it will drop Intergraph, pointing to problems with its 3D chip strategy, say analysts.

Dell has chosen to bolster its push into the increasingly competitive workstation market without technology from Intergraph in certain new models, as analysts warn that Intergraph may be alienating customers such as Dell.

Graphics circuit boards from 3Dlabs and Evans and Sutherland (E&S) will push aside Intergraph's cards. Dell claims, however, that it isn't "burning any bridges" with Intergraph, said Dell spokesman Jon Weisblatt. "We're always open to discussion" about future technologies, he said.

But analysts see problems with Intergraph's strategy vis-a-vis customers like Dell. "Intergraph lost one of its major customers in Dell," said Kathleen Maher, an analyst with Jon Peddie Associates in Tiburon, California.

Intergraph "alienated" Dell by its efforts to keep as much of the competitive workstation market to itself with its Intense 3D workstations.

Intergraph is very pleased with its new high-end Wildcat graphics cards, and "didn't want to give it to a prime competitor like Dell," Maher said.

Dell's Precision WorkStation 410 and Precision WorkStation 610 are available with either the 3Dlabs Oxygen GMX 2000 or the E&S AccelGalaxy 31 graphics cards to handle the complex task of drawing three-dimensional shapes with detailed textures.

The Oxygen model comes with 96MB of memory and two Glint MX processors to handle the 3D drawing processes. Prices for a WorkStation 410 with the graphics card begin at $3,595.

The AccelGalaxy 31 uses the E&S Realimage 2000 chip and has 31MB of memory. Prices for a WorkStation 410 with the E&S card begin at $3,295.

The 3D graphics workstation market is profitable but "incredibly competitive," Maher said, and current players making both the graphics systems and the entire computer are trying to secure what market share they can.

"Dell is real interested in the high-end market, as is everybody, since that's where the money is," Maher said. "Unfortunately, there just aren't that many customers"--about 300,000 Windows NT workstations a year right now, a tiny fraction of the shipments of mainstream computers. The market is important to digital design fields such as animation and computer aided design, she said.

In the workstation graphics arena, the main competitors include E&S, 3DLabs, Intergraph, Elsa, Hewlett-Packard, and Silicon Graphics (SGI), Maher said. "Truthfully, that's too many," she said, and there are more companies waiting in the wings, including Raycer, GigaPixel, Real3D, ATI, and Nvidia.

"Given that size and the enormous cost of development (of graphics controllers), the market is probably only big enough to support two, at most three high-end graphics suppliers," said Jon Peddie in the Peddie Report.

Complicating the lives of high-end graphics developers is the fact that mainstream graphics card companies "are producing 3D graphics products good enough for a lot of users that previously relied on high end products," Maher said. This includes vendors such as ATI and Nvidia.

Some consolidation is already happening, she said. For example, 3DLabs' Oxygen products came from the company's acquisition of Dynamic Pictures.

Meanwhile, Intel continues to keep the market healthy by investing in several companies--even though it has graphics chip plans of its own.

E&S and 3DLabs both have benefited from investments by Intel. Intergraph, though, has been on the other side of the fence, struggling with a lawsuit filed a year ago against Intel and a countersuit Intel filed against Intergraph.

Intergraph blamed some of its recent financial losses on supply problems stemming from the Intel dispute. Intergraph's stock has slipped from more than $11 a share a year ago to less than $7 today, and in October, computer manufacturer SCI Systems took over Intergraph's inventory, manufacturing, and its 300 employees.

E&S, a pioneer in graphics systems that's been active for 30 years, moved its products to the Microsoft Windows NT operating system platform in 1994, said E&S spokesman Ken Donoghue.

3DLabs, meanwhile, is working with Intel to develop a graphics chip to work with Intel's next-generation 64-bit Merced processor. 3DLabs sells its graphics chips to manufacturers of other graphics boards, but Maher said some customers are cautious because of 3DLabs' lawsuit against one of those customers, STB Systems.