Intel: It's not just for chips anymore

Intel, the leading name in...digital cameras and Web appliances?

Usually thought of solely as the market leader in microprocessors and other PC chips, the Santa Clara, Calif.-based giant also has a lengthy if somewhat obscure history of putting its name on full-fledged consumer products.

From a digital microscope for children introduced last year to an unsuccessful line of videoconferencing products offered in the mid-1990s, Intel has experimented with a variety of additions to its main business.

That history cropped up last weekend as CEO Craig Barrett made his first-ever appearance at the Consumer Electronics Show in Las Vegas to tout new and upcoming products. Besides the Pocket Concert digital-audio player and the already established digital Pocket PC Camera, Barrett showed prototypes of two devices for viewing Web pages and sending instant messaging by wirelessly tapping into a PC's Internet connection.

The common denominator among all the devices, Barrett said, is that they connect with and depend on a PC--preferably a PC with a speedy new Intel processor to handle data-intensive applications such as image editing and audio transfer. "New users, new uses for the PC" was Barrett's mantra as he talked with CNET News.com's David Becker and Michael Kanellos before his CES keynote address.

CNET News.com: Can you give us an overview of why Intel is moving deeper into this consumer electronics area?
Barrett: I think the big message is Intel has always been involved in new uses, new users for the PC and promoting the PC as the central interactive digital device. We've been into consumer products stuff for a while--PC cameras--since the old days when we were doing videoconferencing.

The motivation is the constant motivation we've had for years, which is new users, new uses for the PC. You can trace the genesis of this back to the Intel architecture labs, when we were doing research on the various aspects of streaming media and videoconferencing and everything else.

A lot of that we gave away. But one outgrowth of the videoconferencing stuff was the PC camera business, which we've been in a couple of years.

Wireless connectivity is another outgrowth of the architecture lab work. And we're just continuing that. The real issue is excitement around the PC...That obviously promotes our business but promotes the whole industry as well.

You seem to be getting much deeper into the finished-goods business, though.
Well, I don't know what "much deeper" is. We've been in the PC camera business for a couple of years. You can't get much deeper than that. We've been in the wireless and wireline home connectivity business for a couple of years. You can't get much deeper than that. We showed up at CES--maybe that's getting in deeper.

These (new products) seem to me as more of an evolutionary approach than some revolutionary change. I think we're just bringing more value to the PC and working with the rest of the industry to bring more value to the PC.

Probably the best way to look at it from a corporate standpoint is that our main business is still microprocessors and chipsets...This stuff is catalyzing those products into the marketplace.

But these are also devices that use Intel chips. The MP3 player eats up a lot of flash memory, for instance.
I hope it does, but the truth is we're having no trouble selling flash memory today.

What advantages do you bring to the table in the device realm? Is it the brand? The chips?
I think there's obviously an aura associated with the brand around computers and computer architecture. The one thing we inherently know is computer architecture and computer usage. This is what's driven us in the original videoconferencing days and what led to the PC camera business. This is what led to the home connectivity business.

It's basically making these things more easier, more fun and more useful, not just using up more of our chips. We also buy other people's silicon to go into these things.

Is there a branding challenge there? Intel has the cachet in the computers, but cameras? Why are people going to buy an Intel camera instead of a Kodak or a Minolta?
These things are basically extensions of the PC, and Intel is a PC brand. I think Intel is recognized in and around the digital community.

The brand is a nice thing. But ultimately you have to have cool products that people want to use. I don't think we're the No. 1 PC camera seller because of the Intel brand. I think it's because we've put new products out with the right resolution...to do cool things, and it's also detachable to use as a portable camera. It's the right product at the right time.

This isn't a high-priced, high-resolution camera like dedicated camera companies try to sell. Is Intel targeting a mass-consumer market here?
It's more a concept for us of new uses, new users in bulk. We're not going to target the professional photographer you're going to sell hundreds of these a year to. If there are 150 million PCs sold a year, you want peripherals and attachments that are ultimately in the tens of millions per year.

The price points I think that you have to hit for that are pretty critical. You're not going to be targeting the professional; you're going to be targeting more the hobbyist and the home marketplace.

How different is this from what you've done in the past as far as the design aesthetic?
Before it was all about the number of leads on a hunk of silicon. Industrial design is something that's new to the entire PC industry, except maybe for Apple, which has had a leg up in industrial design of PCs for some period of time.

The whole industry is moving toward more consumer-acceptable designs in the products that they put out, whether it's color or styling or what have you. And we've been driving this for several years in our developers forum, with our design contest we had for people to come out with PCs disguised as ottomans, toasters, whatever.

This is a trend in the entire industry. Even if you just want to make PCs, you've got to pay attention to styling.

But it's been so hit-or-miss. The iMac did well, but Dell Computer got rid of its WebPC fairly quickly.
Talk to (Dell CEO) Michael (Dell) about that. I think most consumers like to buy something that's pleasing, with a stylish look, as opposed to something that's just a beige box.

As you choose which devices to get involved with, how important is it to have something that will make people want to buy a faster PC?
Obviously, our intent is to move the whole computing industry forward. But the basic concept here is that the whole analog world is going digital. That means audio; that means video; that means rich animation, rich interacitivty, high bandwidth--and all those things translate into processing power.

Ultimately, the question is, What do consumers want? They want rich media; they want lifelike reality; they want great interactivity. Typically, that stuff requires great processing power.

So you're making the connection that if you want to do these activities, you really want a Pentium 4 to handle them?
Why not? Pentium 4 was created not to run Word faster, not to load an Excel spreadsheet faster. It was created to handle rich multimedia content faster--whether that comes over the Internet, whether you're creating it with a peripheral, whether you're editing your digital videocam stuff on it. That's where we thought the marketplace is going; that's where we think the market is going. And that requires...more processing power if you want a better user experience.

Intel's Barrett focuses on electronics Craig Barrett, CEO, Intel

User experience comes from a variety of areas. We talked about styling, making sure it looks cool. It comes from the user interface. Microsoft is making a lot of advances in that area. And then you want to have a big, hulking, powerful processor in there that can crunch tons of data.

If you want to burn your own CDs or load music into your audio player, you don't want to wait 10 minutes for that to happen. You want to hit "enter" and have it happen instantaneously. Most of us have relatively short attention spans as consumers.

When you look at Intel's experience with videoconferencing, that wasn't a huge success. And with the Dot.Station Internet appliance, there haven't been a lot of sales. What have you learned from those experience?
The biggest lesson I think we learned back in the videoconferencing days is that it doesn't necessarily pay to be a visionary and a pathfinder, especially if the infrastructure is not there. We were trying to push videoconferencing before you had bandwidth and before you had powerful enough processors to compensate for bandwidth. We were also trying to change people's work habits.

What we learned is you can't just run out to the marketplace and expect people to accommodate it. You can throw as much money at it as you want, and they still won't accommodate it into their lifestyle. That was a relatively tough lesson that we learned, but that was back five years ago. I don't intend to repeat that experiment again.