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The week in review: Intel takes its lashes

The chipmaker decides to get out of the business of discrete graphics chips for personal computers, a market it entered less than 18 months ago to fanfare and dismal sales.

Intel decided to get out of the business of making discrete graphics chips for personal computers, a market it entered less than 18 months ago to fanfare and dismal sales.

As first reported by CNET, the company will continue to produce "integrated" chipsets, which combine a standard PC chipset with a graphics processor, but these products will likely remain targeted at computers selling for $1,000 and less.

An 800-pound disappointment
Many industry executives and analysts predicted that Intel's financial and manufacturing muscle would make it the new 800-pound gorilla in the PC graphics world. But on hearing news of the retreat, critics noted that this is merely the latest in a series of missteps by Intel in this market.

The company's lackluster performance can be attributed partly to its size. Analysts said that Intel, despite its multitude of resources, simply got too "comfortable"--it lacked the sense of urgency that drives the smaller graphics companies to succeed.

Although Intel will continue to make integrated chipsets, success there could also be difficult. Such integration tends to degrade graphics performance, experts say.

Good news, bad news
Although Intel steadfastly maintains that its Merced chip will be more than just a test bed, Hewlett-Packard predicted that buyers of its current N-class servers will bypass it as an upgrade and wait for its successor. HP's comments were significant because the company invented the architecture and helped to design the chip, which Intel will build.

HP still plans to sell servers based on Merced chips, including servers running Unix, Windows, and Linux, according to HP's Eric Clow. But HP's own PA-RISC 8500 chip and upcoming 8600 are fast enough that HP expects that customers buying N-class servers now simply will skip Merced and move on to the second-generation 64-bit chip, dubbed McKinley.

Softening the blow, Emachines, the leading star in the low-cost PC market, decided to use only Intel's low-end Celeron chip for its new line of PCs.

But Emachines ran into trouble of its own.

Lawsuits galore
Apple Computer filed a lawsuit against Emachines, alleging that the company wrongfully pilfered Apple's iMac design and feel when creating its eOne computer. The complaint seeks to enjoin Emachines from distributing the eOne, introduced August 5. filed a federal suit against the operator of a Greece-based Web site, alleging trademark and copyright infringement, as well as extortion. The suit concerns the domain name and the Web site located at that address. calls itself "Greece's Biggest Bookstore" and has much the same look and feel as's site.

America Online had a strong week, despite losing a trademark lawsuit against AT&T that tried to claim exclusive rights to phrases such as "You Have Mail," "Buddy List," and "IM."

AOL branches out
The same day news of the judge's decision broke, AOL announced plans to team with to offer downloadable music.

The next day, AOL announced plans to invest in interactive-TV firm TiVo as part of its "AOL Anywhere" initiative to move beyond personal computers into television sets and portable devices. And as the giant's proprietary subscriber base topped 18 million users, the company announced plans for a stronger push to dominate the Internet access market in Europe.

Tuning in
A host of media firms, including Time Warner, Disney, Liberty Media, United Television, and Showtime Networks, invested $57 million in Replay, maker of a digital television recorder that can compile custom viewing lists and skip commercials. The investment fattens Replay's war chest as it goes up against TiVo in the battle to change how people watch television.

Meanwhile, the media giants' role in the battle over interactive television is simple: With these investments, they're making sure to remain in control by guaranteeing that advertising remains a part of the TV experience.

The messaging war escalates
Microsoft launched its most powerful weapon yet in its instant messaging war with AOL, saying it will publish the protocol for its MSN Messenger service. Publishing the code means Microsoft could rely on third parties to help bolster its position in the messaging wars, a strategy reminiscent of its struggle with Netscape Communications for browser dominance.

In another move to attract users to its online service, Microsoft struck a deal with online payment company eCharge, under which MSN Internet Access charges will be combined with MSN users' phone bills.

In a different promotional twist,, the company that provides AOL's long distance telephone service, is sending people checks for $25 in a direct-mail promotion. If the check is cashed, a customer's long distance service will be switched to the AOL-branded service.

Although this cash-for-customers campaign is a first for AOL, it's a familiar tactic of players like AT&T and MCI WorldCom. As AOL continues to face large customer turnover, it is adopting long-standing practices used by telecom carriers that confront similar challenges in their battle for primacy in the long distance market.

Even marketing campaigns can't solve some telecom companies' problems, however. After experiencing software-related glitches in its data network that lasted nine days, MCI WorldCom said it expects to lose revenue not only from the time the network was not operational, but also because it plans to give the 3,000 customers who use the data network two free days of service for each of the days it estimates problems may have occurred.

A place in the home
As the high-speed Net market goes mainstream, communications carriers are looking increasingly toward the budding home-network market as a largely untapped font of new profits. The move is a significant departure for these companies, which have traditionally concerned themselves only with the wires outside the home.

As more consumers gain high-speed Internet access through cable modems and digital subscriber lines (DSL)--and decide to network their home PCs together to share files or printers--the security threat in the home grows greater. Recognizing this danger, antivirus software firms Symantec and are developing security software to protect consumers from malicious hackers who could infiltrate a home PC network.

A place online
Branding and design consultant Addison Whitney launched a "dot com" consulting practice, its first move into the crowded market to provide similar services to start-ups, which like their elder rivals face unique problems in creating consumer brand recognition. In addition, Citibank launched its Citi f/i Web site, becoming the latest company to offer a one-stop shop for financial services.

Ace Hardware said it hopes to launch an e-commerce site, tentatively called eHomeSolutions, by the end of the year. The news came on the heels of Home Depot's announcement that it intends to start selling all of its home improvement line via the Web by the middle of next year.

Also of note
Hewlett-Packard coaxed Oracle aboard its "e-services" initiative, announcing a joint program to develop and use HP's e-speak technology...A nonprofit group called Educause hopes to gain control of domain names ending in ".edu"...Internet services firm USWeb/CKS partnered with Ask Jeeves to install its search engine technology for corporate customers...Front office software maker Clarify acquired interactive sales software firm Newtonian Software in a $16.5 million deal...AT&T filed complaints with five state regulators detailing charges of slow or inadequate service by US West in connecting its long distance customers...Computer security experts discovered a virus that is designed to damage Windows-based personal computers on Christmas Day...Microsoft acknowledged that a security hole found in its Office 97 application suite also affects its newer Office 2000 package...X10, a company best known for home networking technology that controls lights and alarms, wants to capitalize on the popularity of MP3 with a product that beams MP3 files from a PC to a home stereo.