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Grove turns Intel toward low-cost PCs

CEO Andy Grove reveals Intel will market chips for low-end computers under a new, separate brand name and also develop other new brands.

Highlighting a dramatic shift at Intel, chief executive officer Andy Grove said today that Intel is taking a sharp turn toward the development of low-cost PC technology and will market its chips for low-end computers under a new, separate brand name, while it also develops another brand of chips targeted at more powerful computers.

Hear Andy Grove's full keynote from an Intel webcast
Grove was very clear about the sea change at Intel. "We now have 650 engineers working on [low-cost PC technology]. A year ago that was zero."

The new branding strategy effectively means that there will likely be three different Intel brands presented to the public: An undetermined family name for chips belonging to information applicances, a brand for desktops and low-end servers, and a brand for more upscale servers.

Brand segmentation will also mean product segmentation and segmentation of efforts within Intel, Grove added. Chipsets, 3D graphics subsystems, and PC circuit boards, along with chips designed for specific segment needs, will soon be pouring out of the chip giant.

Intel is an investor in CNET: The Computer Network.

The segmentation underscores the seriousness with which the company is pursuing low-cost computing, a segment it missed last year.

"Our plan is to use the latest P6 microarchitecture as the foundation of our product line from top to bottom." He later added : "The processor alone is not enough. We must have motherboards and chipsets" that complement the processor, indicating that Intel is working on a wide range of segmented computer building block products also.

P6 is the overarching design which forms the basis of the Pentium II architecture.

"The processors will differ by brand name in order to highlight the benefits of the product line," he further explained. "You will see the segmentation of our road map. 'XYZ' processors for the basic PC and Pentium II 'ABC' processors for server applications.

Both XYZ and ABC are hypothetical names, Grove explained. The brand names for these segments have not yet been determined, but will be determined by the time the products roll out.

Which will be soon. Intel's first low-end chip, code-named Covington, will appear in the next few months, said Grove. Covington is a Pentium II chip without the extra "cache" memory.

"It comes in a Pentium II package but it substantially less expensive," he said. Grove's use of the word Covington marked the first time an Intel executive has acknowledged the name.

Successors to Covington will also begin to incorporate functions performed elsewhere in the chipsets--a group of chips which work in tandem with the processor--as a way to cut costs.

Grove did not indicate whether Covington would carry a new brand name, but his comments seem to make it inevitable.

High-end server chips based around the "Slot 2" Pentium II design will come out in the near future as well, he said. These chips will be marketed under a new brand name. Slot 2 describes the package of the chip and how the chip connects to the computer.

The Slot 2 design, which allows Intel to boost the speed at which the processor communicates with the computer system, will be used for high-end chips only. The net result is that the "bus" speed will increase from the current 66 MHz to 100 MHz.

The similar, but smaller, "Slot 1" design will continue to be used for desktop chips as well as for chips for foreseeable lower-end devices. Covington, he said, will use the Slot 1 design.

On a similar note, Grove said that Intel would come out with its 64-bit "Merced" architecture in 1999, but that the architecture would remain strictly a high-end technology in the future. Desktop chips will continue to be based around the IA-32, or 32-bit, architecture.

Ambitious as the plan is, it is a work in progress, observers noted. The "cacheless" Covington chip, for instance, is essentially a stopgap measure, Ashok Kumar, a semiconductor analyst, pointed out recently. Intel will likely shift its low-end efforts to an upcoming low-end Pentium II with integrated "secondary" cache memory. The Pentium II core was designed to work with a secondary cache. Without it, the processor doesn't work as well, numerous observers and analysts have said.

The differentiated branding campaign makes sense because Intel will be aiming different products at different segments, but it will also present a number of challenges, said Linley Gwennap, editor-in-chief of The Microprocessor Report.

At the low end, Intel will have to differentiate the new chips from standard Pentium IIs without implying that the chips aren't as powerful.

"At the high end, the branding campaign tends to make a lot more sense. This is something other customers aren't getting. I'm not sure if the same logic make sense on the low end," he said.

An open question right now is how, and to what extent, the new chips will take advantage of the Pentium name, which the company spent millions to establish. "It may still be a Pentium something," he said.

The effort will take money and likely involve a brand campaign that extends to the public.

Putting Covington under a different brand name could be a matter of expediency, however. Without the cache, the chip will not perform as well as standard Pentium II chips. Therefore, Intel needs to differentiate this chip. Like Kumar, Gwennap said that Covington is more of a stopgap measure.

The product differentiation strategy, he added, will lead to a number of ancillary products.

"The needs of the high end are different than the low end," he said. Most likely, Intel will eventually market graphics chips for different segments and also chipsets for these different segments as well as distinct motherboards and processors.

"It makes sense because they are going to develop products that will differ in design respects," said Charles Boucher, semiconductor analyst at UBS Securities. "They used to literally have one product with different speed grades."

"Pentium Jr. probably doesn't cut it, but I wouldn't be surprised to see a designation that includes Pentium or a Pentium II derivative," he added.