Many startups now have Intel inside
Samuel Perry
SANTA CLARA (CALIFORNIA), Dec 29: Call it a prudent insurance policy or a paranoid survival gambit.Either way, Intel Corp, whose computer chips are the brains of most personal computers sold around the world today, has quietly invested a chunk of its roughly $8-billion cash pile into scores of start-up companies in fledgling industries ranging from online musical concerts to space-age graphics. The world's largest semiconductor company has become a leading force in Silicon Valley's venture capital community over the last several years, making at least $500 million in investments in more than 100 companies.Many Silicon Valley investors consider that estimate conservative, and even the head of Intel's 30-strong investment and business development arm admits the pace of investing has quickened dramatically in recent months. "The transaction rate has doubled in the last two years as we get more and more satisfied and confident in our strategies," said Leslie Vadasz, Intel's senior vice president and director
of corporate business development. While some recent investments involve classic acquisitions- like Intel's plan to acquire Chips & Technologies Inc in a $400-million deal that would be Intel's largest ever -- many more involve small bets of several million dollars each for a minority stake. Unlike Chips & Technologies, which would add to the range of Intel's core chipmaking business, many other investments are in new industries, such as Internet-based media companies. The investments underscore a push by Intel chief executive Andy Grove -- whose recent book was titled "Only the Paranoid Survive" -- to generate fresh demand for Intel's ever-faster chips while also searching for entirely new opportunities. About 80 per cent of Intel investments are now in entirely new market segments, Vadasz reckons. These mostly involve rivate companies working with promising technologies such as interactive, multimedia discussion groups on the Internet. An example of those are virtual communities, in which people
can participate in multidimensional communities by assuming on-screen identities as make-believe characters known as avatars. Intel has invested in two such concerns. An Intel vice president, Michael Maerz, even left the prosperous chipmaker to head up one of these, The Palace, in which Intel has invested with Softbank and Warner Music Group, a Time Warner division. "We don't have any business selling virtual community applications, but it became obvious that we should help companies in this space," Vadasz said. "This could really create more demand for high performance PCs." Other areas range from electronic commerce to new technologies for offering concerts on a PC. Intel also has shown interest in graphics visualization and the entertainment industry. Last spring, it invested $14.75 million in video production equipment company Avid Technologies Inc. Tony Perkins, editor in chief of Red Herring, a magazine covering the high tech venture capital industry, said Intel and other top technology
companies such as Microsoft Corp increasingly savvy private investors. "They are able to be very competitive as they have other resources they can offer these companies," he said. "Investing in other companies is more strategically necessary and important nowadays than it used to be." Some analysts regard it as a form of research and development on the cheap, since it provides access to nimble startups working on emerging technologies without having to bankroll the projects directly. Potential capital appreciation is an added attraction.
Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.
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