As increased competition in PC chips has lowered prices and slowed revenue growth, Intel has looked for ways to stir up demand for processors. Part of that strategy is to focus more on networking, which accounts for about $1 billion of the company's $25 billion in yearly revenue, analysts say.
Intel is one of the leaders in selling Ethernet networking cards and hubs, but it has also looked with envy at the high-end networking market--and Cisco Systems' success at providing the technology to help telecom and corporations build up their high-speed Internet networks.
Yesterday, Intel released technology that allows multiple Windows-based PCs to communicate through regular telephone lines. As reported, the AnyPoint Home Network product lets PC users share an Internet connection, files, and printers--as well as let gamers play multiplayer games--within a home.
"Home networking will drive new entertainment applications, such as video on demand and streaming audio and video throughout homes. That suits Intel very well," Yankee Group analyst Kuruna Uppal said.
"Not only will they sell the home networking equipment, but those kind of applications require Pentium-class or better processors. And that's their bread and butter."
As an indication of its increased networking focus, Intel recently purchased Level One Communications, whose technology includes digital subscriber lines, or DSL, a high-speed alternative to cable Internet access.
"Everyone's talking about a converged world of voice and data and Intel wants to be a part of that, whether it's home networking, video on demand, or video conferencing," Uppal said.
In home networking, Intel is competing with an alliance between 3Com and Microsoft, Diamond Multimedia, and dozens of other companies in the emerging market, which will reach $230 million by 1999 and grow to $1.4 billion by 2003 as high-speed cable and DSL services become more ubiquitous, according to a study by analyst firm Cahners In-Stat Group.
At its launch yesterday, Intel stressed the ease-of-use of its first home networking product, an important feature to ensure that consumers will embrace the technology.
"We really made this easy enough for a mere mortal to install a network in their homes," said Dan Sweeney, general manager of Intel's Home Networking Operation. "Consumers only need to answer two questions--name the PC and which PC has the Internet connection--and everything else is done automatically."
Intel said it has signed an exclusive arrangement for computer superstore CompUSA to sell the product, which costs $189 to connect two computers. Intel will sell AnyPoint on its Web site and PC maker Gateway is bundling it into some of its PCs.
Analyst Mike Wolf of Cahners In-Stat Group said home networking makes sense for Intel because it's similar to the networking cards and hubs the company builds for businesses.
"They've been active in local area network connectivity. It's not a big leap for them [technology-wise]," he said. "But this is big because it's their first consumer product for networking and the first one sold over the Internet for consumers," he said.
Because of those factors, Uppal said it's important that the product is bug-free.
"It's vital that they execute well," she said. "They have a brand that people obviously know, trust, and love. Most people understand that Intel powers the computer, but doesn't know much beyond that. If the PC breaks, they blame Dell, HP, or Microsoft. But if this breaks, they blame Intel."
In an interview with CNET News.com, Sweeney said the company considers 3Com its main competition in home networking.
Analyst John Todd of C.E. Unterberg, Towbin agreed, saying Intel and the 3Com-Microsoft alliance will be the early market leaders because of their strong consumer presence. "Right out of the chute, they will be the dominant players in the phoneline home networking technology because of their name value and market presence."
Uppal said 3Com might have one advantage over Intel because of its partnership with Microsoft. The Redmond, Washington-based software firm will create software for 3Com that Intel will not have access to, she said.
"3Com will not only have easy installation software, but also software that would run on the home intranet, like scheduling," she said. "If you have three PCs in the house, the son could put on the calendar, 'Mom, take me to the soccer game,' and when she logs on to the computer, that may pop up."
As further evidence that Intel is placing its bets on home networking, company executives yesterday announced a product road map for future technology.
The current AnyPoint product runs at speeds of 1 Mbps and offers a parallel port connection. Sweeney said the company will release USB port model this fall, and will support the next phoneline standard that runs at speeds of 10 Mbps. A product will be released in late fall or early next year, he said.
Sweeney said Intel will also release wireless home networking products in early 2000, and will provide a connector that will let users use wireless and phoneline products at the same time.
The company is further considering powerline technology, which allows consumers to connect their PCs through electrical outlets. But powerline technology might be two to four years away as companies try to develop the technology and reduce the noise that affects data exchange, Sweeney said.