Intel's e-commerce strategy emerges

Rising executive talent Sean Maloney has become the unofficial czar of e-business for Intel, which is now positioned to begin competing in the e-commerce market with a broad swath of Internet and other high-tech companies, including Wintel partner Microsoft, America Online, Oracle, IBM, and Yahoo.

"The microprocessor business and the Internet business are the same thing," said Maloney, senior vice president for worldwide sales and marketing. "The No. 1 reason to buy a PC is to get on the Internet."

Beyond the $1 billion a month it receives in customer orders over the Net, the chipmaker's move into e-commerce began with a familiar pattern of investment in other companies whose success could be eventually benefit Intel, directly or indirectly.

For example, Intel has for many years subsidized advertising of PC manufacturers that use its processors. More recently, the chip giant has taken strategic stakes in various content companies, banking on the growth of the Internet to require more PCs--which, again, would mean more Intel processors.

"[Intel] recognized that demand for processing power was going to be driven by Internet connectivity," said e-commerce analyst David Alschuler of the Aberdeen Group.

Beneficiaries of Intel's financial backing have included such publicly traded firms as e-commerce software vendor Open Market, payments firm CyberCash, and digital ID issuer VeriSign.

Intel has also invested in start-ups such as CompareNet, which was later acquired by Microsoft, Ariba, BackWeb, and iPrint.

Another such investment, in e-commerce firm iCat in December, turned into an acquisition and Intel's direct foray into Web commerce software. Pandesic, which provides services to companies that want to sell on the Net, is technically a joint venture with German software giant SAP, but SAP's influence on Pandesic is widely viewed as diminishing.

iCat has become Intel's biggest e-commerce question mark. The company has gone dark, doing very little marketing since the deal closed. At the Internet World trade show this week, Intel executives revealed that the old iCat has been split in two: Half is the application software business where iCat started and the other is a services unit called iCat Commerce Online or iCO.

"iCO is focused on small and medium-sized businesses, and we provide them the support required to find new customers and support for existing customers online," iCO general manager Doug Schulze said.

The software business remains mum but needs to craft a strategy for keeping the loyalty of the thousands of Web developers that have used iCat tools to build Web storefronts for clients. Intel execs hint that a change in the business model is being considered.

iCat technology is also going to be a major part of Intel's deal with Excite for a consumer shopping service set to launch in June. What Intel calls "a commerce engine" on the busy portal site aims to do more than link to online retailers. But neither companies has given specifics about what "more" means--collaboration tools, ways to promote sales, and tools to locate desired items.

"We expect to see results later on this year for both consumers and merchants," said Maloney. "One of the first issues we're looking at is improving information management."

With iCat focused on the smallest companies, Pandesic is aiming higher, at merchants who do $10 million to $100 million a year in business and want to outsource their e-tailing operations rather than wrestle with the technology.

"The 'dot-coms' are in the heart of the market," said Pandesic vice president Catherine Yetts. Pandesic gets a cut of the sales generated by the stores it builds and maintains.

"We make money when a merchant makes money," Yetts said, a model that lets the start-up e-tailer up and running with a low entry price. But Pandesic has just a handful of customers it can name publicly.

Given the ferocity Intel has exhibited in dominating the market for microprocessors, it may be premature to write the company off as rudderless and lacking direction in e-commerce. The same could be said of Microsoft, which no one discounts as a competitor.