Intel's Expensive WiMax Habit

SAN FRANCISCO -- IntelINTC doubled down on its WiMax bet Wednesday, plunking $1 billion into the nascent high-speed wireless network championed by Sprint NextelS and ClearwireCLWR.

But the real story behind Intel's big-ticket investment is that the chipmaker really didn't have any other choice.

The deal was as predictable as a desperate craps player's visit to the ATM: Intel had too much riding on WiMax to walk away from the table, a situation that TheStreet.com foresaw in October.

In fact, investors may actually be relieved that Intel only parted with $1 billion for its WiMax obsession.

The network might ultimately turn out to be a smash hit and Intel's deal a great investment. The need for high-speed wireless access to data is real enough, particularly as consumers and businesses embrace a new generation of mini notebooks and feature-rich cell phones.

And the WiMax trials under way in numerous foreign countries, particularly in Asia, seem promising.

But in the U.S., one of the most crucial markets, WiMax was anything but a fait accompli. Sprint, which was suffering from its own business meltdown, was clearly not keen on upholding the WiMax strategy laid out by its ousted CEO Gary Forsee. And Clearwire's deteriorating financial position put a huge question mark over the company's plans to build its own wireless network.

Meanwhile, competing wireless technology, like LTE, or the Long Term Evolution standard, were threatening to make WiMax obsolete if it didn't become available soon.

The problem is that Intel has based a good portion of its product development and business strategy on WiMax. Intel's new generation of notebook PC chips, to be released this quarter, incorporate WiMax capabilities. And Intel's venture capital arm, Intel Capital, has already invested $620 million in Clearwire, not to mention investing in 31 other WiMax-related deals around the globe.