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New Management Model Speeds Intel's Chip Development

Chipmaker calling on the talents of new acquisitions. Also, its Internet push, and AMD's rival bash.

PALM SPRINGS, Calif. --

Intel

(INTC) - Get Report

will be producing its new networking processor, called the Internet Exchange Architecture, in full volume next month, just seven months after it first unveiled the chip. Thirty companies, including

TST Recommends

Nokia

(NOK) - Get Report

,

Ericsson

(ERICY)

and

Lucent

(LU)

, are already designing their systems with it.

This is record time for Intel, where chip development typically takes years. But the networking division at Intel is a new animal representing a new model of management. Homegrown Intel personnel make up only half of the staff, while the rest come from assorted companies Intel has recently acquired, including chipmaker

Level One Communications

, software-makers

NetBoost

and

Softcom

, and equipment-maker

Dialogic.

Integrating these companies required changing Intel's historically centralized approach toward development, says Mark Christensen, general manager of Intel's

Network Communications Group

, speaking at the

Intel Developer's Forum

. "We are definitely loosely connected," he says. "We are a bunch of focused teams trying to beat the competition in every sector. My job is to not let any of the bureaucracy filter in."

This structure is the future of Intel, he says, as the company moves into new markets like wireless communications, networking and services, which need a measure of automony. "

CEO Craig

Barrett is very committed to growing the company, but he realizes it has to be managed in a much different model," he says.

Intel's Internet Push

Don't even think of suggesting to Paul Otellini that Intel was late to the Internet party. As general manager of architecture for the world's biggest chipmaker, he's the guy that plots out global domination of Intel chips over every computing and networking device. He's also regularly named in the industry as a possible successor down the road to CEO Barrett.

When Chairman and then CEO

Andy Grove

in 1996 first talked about a day when there would be 1 billion connected computers, Otellini tells

TSC

in a poolside interview at the

Wyndham Hotel

, "nobody had clear Web initiatives," he says.

Turns out we have Intel, and not Vice President

Al Gore

, to thank for our ability today to bid for an

X-Files

wall clock.

Intel has spent extraordinary amounts of time and cash (equity investments in some 350 start-ups now worth about $8 billion) prodding the software and hardware industry to develop nifty Web applications, he says. And don't forget that the Internet is built on PCs, most of which have Intel inside. "The Web wouldn't have happened without 400 million computers out there," Otellini says.

At a recent financial conference the executive of one semiconductor company suggested that Intel seemed to be investing in hundreds of emerging technologies, in hopes that one will become as successful as the microprocessor, the product that made Intel one of the most profitable companies of all time.

"I don't think anything can be further from the truth," Otellini says. "The wrong thinking is to presume that Intel is out to create another microprocessor franchise. No company can do that

kind of success twice. We look at the Internet as

the

demand driver. We understand and know how to evolve the silicon, and around this area we know that there are a couple of business opportunities that will be tremendous."

Take networking and technology services, such as the operation of server farms, sectors that Otellini thinks have tremendous growth. These are areas just now developing, with plenty of room for a resourceful company like Intel to build market share fast. "We think we have as good a chance as anyone. The question is how well we can do."

New Product Line

Beginning next week, Intel will begin worldwide shipments of a new series of products, named NetStructure, that will connect routers to servers and increase the ability of servers to handle traffic and transactions, while elevating the speed, bandwidth and security of the network. John Miner, general manager of Intel's communications products, says the new product represents a "new category creation" of appliances. To promote the new line, Miner says, Intel will spend "tens of millions of dollars" for advertisements in technology and business publications.

The Hinterlands

Camped out at the

Palm Springs Hilton

down the road from the Intel forum, two representatives from Intel's scrappy rival,

Advanced Micro Devices

(AMD) - Get Report

, tried to upstage Intel's party with a small bash for the company's high-speed Athlon processor.

"We have to do everything we can to make sure we keep up with Intel on performance," says Mark Bode, division marketing manager for AMD's Athlon, the chip that outpaced Intel's Pentium chip in speed earlier this year.

Bode joined AMD just several months ago. His previous stint had been at

National Semiconductor

(NSM)

, which Intel drove out of the microprocessor business, forcing National to sell its Cyrix PC chip division to Taiwan-based

Via Technologies

. Bode isn't worried that AMD could meet the same fate. The Athlon outperforms Intel chips and will continue to do so, he says. "We will be the performance leader."

Give points to AMD for chutzpah, since the Hilton was fully booked with Intel fanatics.