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Intel digs deeper into graphics

The chipmaker buys a piece of Evans & Sutherland for $24 million, another step in its expansion into 3D graphics and high-end workstations.

Intel bought 8.2 percent of graphics chipmaker Evans & Sutherland for $24 million today, another step in the processor giant's push to expand its presence in graphics chip technology.

Under the deal, Evans & Sutherland will collaborate with Intel to deliver graphics chips, graphics circuit boards, and "multiboard" graphics technology for workstations based around Intel's Pentium II Xeon and next-generation 64-bit Merced processors, said Jim Oyler, chief executive of E&S.

Today's announcement marks the fourth graphics chip investment Intel has made in recent years. Besides owning a piece of 3Dlabs, the company also owns part of Real3D, and last year purchased notebook graphics chip specialist Chips & Technologies outright.

All this activity has not gone unnoticed. As part of its ongoing antitrust probe, the Federal Trade Commission has been investigating the effect the company's move into graphics will have on that market, sources have said. A trial examining Intel's business practices and various antitrust issues has been set for January.

Intel also makes its own graphics chip called the Intel740, which is targeted at the mainstream PC market, and has plans to integrate graphics into its chipsets next year. With today's investment, Intel is boosting its capability to offer sophisticated, high-end 3D graphics technologies.

Salt Lake City-based E&S will conduct the lion's share of the graphics research, Oyler said, but will work with Intel to harmonize these products with chipsets, processors, and input-output specifications from Intel. The first products to be produced under the deal will appear in the second half of 1999.

The investment aims to improve the graphics performance of Intel-based workstations, in hopes of propelling these systems into the upper price echelons of the workstation market. Unix-based machines still predominate at the top end. Better graphics are aimed at cutting the performance gap between Unix systems and Windows NT-based machines in visual computing applications.

Currently, Intel-based workstations account for close to 70 percent of sales, but less than 50 percent of the overall revenue, said Pat Gelsinger, vice president and general manager of the Business Platforms Group at Intel.

"Almost every customer in that overall market needs high-performance graphics," said Gelsinger. "This is the fastest-growing sector of the market. It is growing faster than servers. It is growing faster than notebooks."

"This will extend [the Intel architecture] upward into the very high end, where the highest average selling prices and revenue are," added Oyler.

The investment could give E&S a significant advantage in a very competitive market. The graphics chip business is one of the more crowded and competitive fields in computing today, with an estimated 45 companies working on 3D chips.

Chip breakthroughs, moreover, are outpacing Moore's Law, which is forcing companies to invest heavily in research. Although most graphics chip vendors focus on the desktop market, the workstation market has also drawn a lot of attention.

Evans & Sutherland's main competitors in workstation graphics are Intergraph, which announced a new graphics architecture yesterday, and 3Dlabs, which Intel partly owns, according to Oyler. Intergraph's graphics systems are used by Dell Computer and IBM. (Intel is also an investor in CNET: The Computer Network.)

E&S, however, can count Compaq as a customer. On Monday, the two companies announced that they will collaborate on graphics subsystems for Compaq's Intel and Alpha workstations.

The announcement was made at Siggraph, an important computer graphics trade show being held this week in Orlando. Gelsinger said that he and Oyler first discussed greater collaboration at last year's Siggraph show.

On another front, 3Dlabs has been collaborating with Intel on a graphics chip for the 64-bit Merced processor, due in 1999. Collaboration with Real3D resulted in this year's introduction of the Intel740 graphics desktop chip.