Intel to turn venture arm to wireless

Wi-Fi, also known as 802.11, is emerging as the saving grace in a dour computer market. The technology lets anyone with a desktop, notebook or cell phone create a high-speed wireless link to the Internet or corporate networks. Demand is expected to increase substantially, and telecom carriers, hardware manufacturers and chipmakers are all crafting products and services for the market.

"In the last six months all of the carriers have dramatically increased their interest" in developing Wi-Fi services, said Mark Christensen, vice president and director of Intel Capital's Communication Sector. "802.11 is almost taking off on its own without help from the industry. It reminds me of the '80s when (software maker) Novell took off."

Intel itself will jump into the Wi-Fi chip market early next year with its Banias processor for notebooks. Most Banias notebooks will contain an integrated Wi-Fi module from Intel, code-named Calexico, that will contain Intel's first 802.11a and 802.11b chips Other 802.11 chips will work with Banias, but Intel has only qualified, or intricately tested, Banias with Calexico, which will likely make it the default choice for PC makers.

The Santa Clara, Calif.-based chipmaker intends to invest in promising start-ups that tackle various elements of creating a complete Wi-Fi environment, including companies focused on improving security, making more powerful antennas and offering better roaming.

For instance, Transat, one company Intel has already invested in, has created technology that makes it possible for carriers to bill cellular calls and Wi-Fi calls to the same account. Although that may sound easy, the multiplicity of billing systems, the complex alliances between carriers and other technological problems make unified billing onerous, according to several sources.

"This allows mobile carriers to offer 802.11 as an incremental service," said Christensen.

So far, Intel has invested in approximately $25 million of the $150 million total into 10 wireless companies, including Transat, Nomadix and iPass.

The $150 million comes out of the Intel Communications Fund, created in 1999 primarily to invest in companies building products around Intel's IXA communication chip architecture.

Chips embodying the IXA architecture, however, are largely aimed at the telecommunications market, which has since hit hard times. The decline of the telecommunications market in part prompted the fund's shift to wireless. The company has put $500 million into its Communications Fund to date.

Intel Capital invests generally less than $5 million in start-ups, which can go a long way these days with the depressed stock market.

"You can buy a lot of company for a million or 2 million," Christensen said.