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PALM SPRINGS, Calif. -- Intel (INTC) - Get Intel Corporation (INTC) Report, which opened its twice-yearly conference for chipheads today, strutted its stuff as usual, at one point demonstrating the faster microprocessor ever, a 1.5 gigahertz model.

So it was not much of a surprise that the company stock hit a new high of 112, up 2 1/8.

But that was nothing compared to the boost Intel gave to an ally,


(RMBS) - Get Rambus Inc. Report

, which designs the memories for many of Intel's chips. As the

Intel Developer's Forum

opened, the company affirmed its backing of Rambus-based chipsets, which connect a processor to memory, for the desktop market. It backed away from the alternative, known as double data rate DRAM, relegating it to the market for expensive servers.

The announcement, which came during a speech by Intel executive Pat Gelsinger, added a whopping 40 points to Rambus stock, which closed at 151 47/60, a 35% gain.

The development, though, left some analysts here shaking their heads. Although they declined to talk on the record, the analysts think Rambus' designs cost too much for any memory-makers to make a decent profit, especially since Rambus charges a 1.5% royalty on every chip.

One analyst laughed at the stock jump. Intel, he says, usually makes a big show of its partnerships at the forum, and that includes Rambus.

Stay tuned.

Numbers Game

Then again, why shouldn't this be a lovefest for Rambus? The IDF is one big lovefest of semiconductor technology, after all. It started over cocktails Monday evening. That was Valentine's Day for the rest of the world, but a time to talk transistors if you are one of the 3,000 geeks that show up to this event.

So what excites people here? Big, big numbers.

Like 1.5 gigahertz. That's the speed at which

Andy Grove

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, Intel chairman, and Albert Yu, general manager of Intel's microprocessor products group, cranked up the long-awaited Williamette chip for desktop computers. Consider that the fastest Pentium right now runs at 800 megahertz, or 0.8 gigahertz. We're talking about almost doubling the speed of the fastest computer chip.

Here's another number: 320 million transistors. That's how many are packed on an Itanium chip being passed around here. Intended for use in servers, the chip is the size of a Palm Pilot and is Intel's first completely new architecture in some 20 years.

Even for Intel, Big

As chairman of a company that generates $30 billion a year in sales, you'd think Grove would be used to big numbers. But in a keynote speech, he stumbled on the word "trillion" -- as in dollars -- when talking about the growth of electronic commerce, where Intel is trying to make its mark. Grove says he's still getting used to numbers that large.

How has Intel adapted to the Internet world? By opening up its fat purse so that now it can offer cable-modem products from recent acquisition

Stanford Telecom

, network chips from

Level One Communications

, cell-phone chipsets from

DSP Communications

to name just several of a slew of new non-PC Intel products. Intel's goal is to give the market a chip for every type of device over which data will fly, while solidifying its hold on its core market of microprocessors -- and not just for high-performance computers, but desktops that sell for less than $600.

Grove calls the transition from a one-product company to a company with a long product list "a work in progress." Even so, the formula Intel has followed in the simple one-chip world -- that of making the products ever faster and in high volumes to make them ever cheaper to buy -- still works. Because, when it comes down to it, he says, the new world is not that different from the old world. "The Internet runs on silicon," he says. "The PC formula will work for the new Internet economy."

Intel Inside Your Phone

To measure the complexity of Intel's new diversity, just look at one piece, cell phones. It was inevitable that the world's biggest chipmaker would attack the world's second-largest semiconductor market. While some 113 million desktop computers were sold last year, according to market research firm


, 283 million cell phones were sold. And while the PC market is growing at between 20% and 25% a year, the number of cell phones next year will grow 44% to 410 million.

"That has gotten our attention," says Ron Smith, general manager of Intel's wireless communications and computing group.

That's an understatement. The wireless attack is so complicated even Smith has difficulty explaining it. There's the new Intel subsidiary, DSP Communications, an Israeli company Intel bought in November for about $1.6 billion that makes cell-phone chipsets -- a device that integrates digital signal processors in a phone. Then there is the digital signal processor itself, which is being developed in partnership with

Analog Devices

(ADI) - Get Analog Devices, Inc. Report

, even as Intel is working separately on a new microprocessor based on its StrongArm technology. Add to that Intel's own homegrown flash memory chips -- memory that can hold data without power -- and you have a bunch of pieces that Intel thinks it can connect in one nice package.

Its target: So-called 3G phones, the next generation of cell phones capable of transmitting data and video, expected to roll out in 2003. And the best chance for market growth, Smith says, is internationally, in places like India, China and Brazil, where the markets are still in their infancy. "New technologies are actually moving faster in other countries," he says, "and that's a major part of our focus."