Intel To Put Big Money Into Research

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November 15, 1998 (8:54 AM EST)

Intel is setting its sights on the server and workstation marketto the tune of $1 billion in research and development next year.

During its fall meeting with financial analysts in San Francisco Friday, Intel executives outlined the chip company's plans for 1999 and beyond. The half-day meeting covered a broad range of subjects, from processor plans to market strategies to cost-cutting efforts.

Paul Otellini, executive vice president and general manager of Intel's architecture business group, told the crowd of analysts that Intel sees a lot of potential in both the workstation and server markets. The server market, in particular, offers the opportunity for Intel "to sell a lot of processors into a given box," he said.

"We think the market potential for growth is really astronomical," Otellini said.

Intel is doing well with its high-end Xeon processor for servers, which it introduced in June, he said. Next year, the company plans to dedicate more than 50 percent of its microprocessor research and development dollars -- about $1 billion -- to the workstation and server marketplace, he said.

"So we're serious about it," Otellini said. "We're investing ahead of the revenue growth even though the revenue growth has been very, very good for us over the last couple of years."

He also outlined Intel's plans in the budget, mobile and mainstream PC markets. In the first half of 1999, Intel will take its budget Celeron processor over 400MHz, and also release more highly integrated companion chipsets for the processor, which will help bring the cost of the platform down, he said.

The mobile market also is a major focus for Intel, Otellini said. He said segmentation will come to the notebook market early next year, as Intel introduces new 266MHz and 300MHz Celeron processors for low-priced portables and a new 366MHz Pentium II processor for the high-end.

The Santa Clara, Calif.-based chip giant also plans to produce mobile products on 0.18-micron process technology by the third quarter of 1999. "The fastest notebooks will be equal to the fastest desktops as we move to 0.18," he said.

For mainstream, or higher-end PCs, which Otellini called "the heart" of Intel's business, the company will roll out Katmai early next year. With 70 new instructions, the chip has "probably the most significant architectural changes we've made to our processor line in quite some time," he said.

Intel is pursuing innovative form factors for the PC, he said.

"We're also very interested in taking advantage of some of the energy that's been focused as a result of the iMac introduction," Otellini said. He added that possibly the best thing that Apple Computer Inc.'s iMac did for Intel's side of the industry was to direct PC companies into "focusing on new form factors and getting away from the big, bulky boxes."

At Friday's show, Intel showed off two of its PC prototypes that feature innovative designs: one shaped like an orange pyramid cut off at the top and the other like a twisted tower. Patrick Gelsinger, corporate vice president and general manager of Intel's desktop products group, demonstrated the pyramid-shaped prototype's ease-of-use features by connecting 70 peripherals via a single USB port on the device.

Meanwhile, Sunlin Chou, vice president and general manager of Intel's technology and manufacturing group, told the analysts that the company has "extremely aggressive plans to ramp up on 0.18-micron technology" in 1999.

With 0.18-micro process technology and microprocessor design improvements, "we can see future processors moving to 1GHz and beyond," he said.

Andy Bryant, Intel chief financial officer, discussed Intel's various efforts to cut costs. The company's efforts include reducing travel expenses, labor costs, and re-engineering product packaging for lower cost. He said the company expects costs to drop in the fourth quarter.