As PC Market Flattens, Intel Sets Sights a Little Higher


With competition flattening prices and threatening to erode profit margins in the PC business, Intel is increasingly focusing its massive firepower on pushing its microprocessors into higher-end systems used for everything from complex financial modeling to running huge corporate networks.

Consider the $16-billion market for workstations, the computers you find on the desks of such "power users" as electrical engineers and financial analysts. As a result of improved Windows NT software from Microsoft and faster microprocessors from Intel, 1.3 million Intel-equipped workstations were sold last year, nearly double the 660,000 units sold by traditional workstation vendors such as Sun Microsystems, according to IDC, a Framingham, Mass.-based market researcher.

In the server market--servers are the machines that run computer networks--more than half the units sold last year contained Intel processors.

Craig Barrett, president of Santa Clara, Calif.-based Intel, won't say how much of the company's $25 billion in annual sales came from servers and workstations, but he predicts that by 2001, sales of Intel-based workstations will outpace those of Unix-based machines. Intel itself plans to move all 5,000 of its design engineers from Unix workstations to machines containing Intel chips by next year.

Still, Intel isn't satisfied. The chip giant has boosted to 756 the number of employees dedicated to developing and marketing products for the workstation market, up from just a couple of dozen in 1995. Research spending in the area has shot up to $214 million from $6 million in 1995. And that doesn't include the billions Intel throws at microprocessor research.

This summer, Intel will release a new chip, not yet named, that will integrate extra memory and extra-fast communications capabilities. That chip, at a clock speed of 450 megahertz, will nearly match the fastest microprocessors on the market, but will cost far less.

"It used to be Intel put out processors and it went from the top of the line to the bottom of the line in a couple of years," Barrett said. Now, with the market more segmented and customers demanding different functions in a PC microprocessor and those designed for workstations, Intel must custom-design chips to meet the needs of the market.

The company is also developing more sophisticated computers built around its processors. In DuPont, Wash., Intel has established a research facility dedicated to servers and workstations. Such systems would use as many as nine microprocessors in a single computer.

Intel is also establishing centers around the country where software developers can tune their wares to run at maximum speed on Intel hardware.

At the low end of the market, Intel sometimes finds itself at loggerheads with Microsoft. For example, the Windows CE software designed for millions of TV set-top boxes, hand-held PCs and other appliances won't run on Intel chips.

But at the high end, the so-called Wintel alliance is stronger than ever--expanding in concert into the server arena, for instance.

Intel may make its deepest inroads into the huge market for computers that run entire corporate networks at the end of 1999, when it introduces its 64-bit Merced design, which Barrett says will represent a twentyfold increase in performance in just four years.

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