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From microprocessors to media

From microprocessors to media

From microprocessors to media
By Jeff Pelline
September 4, 1997, 12:00 p.m. PT

special report Intel chief executive Andy Grove is rich and famous, at least by Silicon Valley standards, so he is no stranger to the south of France.

But the reason for his appearance there this year--a fittingly virtual one, by videoconference--was less ordinary than previous trips. Grove received the first "cinema digital technologies award" at the 1997 Cannes Film Festival, joining those who won awards for their films.

The award honored Intel for creating digital technologies, such as MMX, "all of which benefit" moviemaking, as the festival's president put it. Some critics huffed that the special award was little more than a publicity stunt, but it nonetheless highlighted a key strategy for Intel, albeit an unlikely one: investing in new media and entertainment.

Why would a semiconductor manufacturer care about Hollywood or We wanted to work with early-stage companies who had new ideas that intersected with where the PC is going.striking deals with companies such as a maker of virtual-community software (The Palace), a creator of interactive stories on the Web (Digital Planet), or a Hollywood talent agency (Creative Artists Agency) to open a multimedia lab?

Simple, Intel executives say: to sell more computer chips.

"We believe it's a critical activity to grow not only our business but the PC business," said Intel vice president Avram Miller, who heads the company's new media investments. "The PC is a new medium, and we wanted to work with early-stage companies who had new ideas that intersected with where the PC is going."

The nearly decade-old strategy has made Intel a venture capitalist in its own right. The company now owns shares in more than 100 companies, and the market value of these investments exceeds $500 million, including shares in mainstream semiconductor markets. Excluding these mainstream markets, the new media and entertainment holdings range in the "tens of companies," Miller says, without being more specific. Most of them came in the past two years.

In addition, Intel strikes non-investment alliances with dozens of other companies. For example, it sponsors "media symposiums" like one last summer in Silicon Valley for partners to demonstrate their technology with Intel's.

One of Intel's biggest media investments is CNET: The Computer Network, which publishes NEWS.COM. Intel bought a 4.5 percent stake in CNET just before the company went public last July and since has increased its holdings to 6 percent.

In Silicon Valley, venture capitalists say Intel is one of the more aggressive investment players, and its activity is accelerating. "I'd say we're following Moore's law right now," Miller quips, referring to the principle coined by Intel founder Gordon Moore.

Intel's game plan is decidedly different than Microsoft, the other half of a powerful PC alliance of operating systems and microprocessors. Whereas Microsoft may buy one of these companies outright or jump into the business itself with ventures such as Sidewalk for online enterainment, Intel has taken a more deliberate approach.

"We're not a media company or a content company, and we never try to take control," Miller offers.

He concedes that Intel's pending buyout of Chips & Technologies is an exception but notes that it is a chipmaker, not a media or content company.

According to Miller, most of Intel's media investments pay off. "The real risk for us is not that we lose our money; it's that these projects don't work out, and we don't grow the market," he said.

One notable example: "The Spot," a much-publicized Web episodic that folded in July, beset by financial woes. Launched in June 1995, the show chronicled the lives of a group of young roomates in a Southern California bungalow. While promising, the climate for such Web soaps is not yet favorable, according to industry executives. "Timing is everything," Miller noted, confirming that Intel was an investor.

On the brighter side he added: "The majority of our investments have been successful." End of story

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