August 24, 2005 3:04 PM PDT

Intel dials up Skype support

A correction was made to this story. Read below for details.
SAN FRANCISCO--Intel is investing in VoIP giant Skype to make sure the company's software products are streamlined for Intel's next generation of dual-core processors.

Intel senior vice president Pat Gelsinger said Wednesday that the two companies were working together at the research and development level to build what he called "good business-class audio," for voice-over Internet protocol networks.

"I'm happy to announce a partnership between Intel and Skype to make their clients better on our platforms using our software technology, codec technology (encoding and decoding software), and our dual-core platforms," Gelsinger said during his keynote at the Intel Developer Forum here. The collaboration will lead to "improvements in the number of participants in calls and the quality of calls as well."

Financial terms of the deal were not disclosed. An Intel representative said Skype does not receive funds from Intel Capital, the chipmaker's investment arm.

Skype, out of Luxembourg, produces software that lets people make phone calls using a PC connected to the Internet. Gelsinger said Skype's software has been downloaded more than 150 million times since its introduction nearly two years ago. Skype advertises that it has as many as 3 million simultaneous users at any time of day. While Skype's annual revenue has not been disclosed, analysts suggest that its valuation could be in the $6 billion to $10 billion range.

The service currently works fine on Intel computers, but an Intel representative said the chipmaking giant wanted to make sure the service ran even better on the upcoming Centrino mobile platform, code-named Napa. Due out in the first half of next year, Napa's technology combines the dual-core Yonah processor and the multimedia-enhanced Calistoga chipset.

Much of the improvements in the communications depend on enhancements to the digital audio signal. During the keynote, Gelsinger compared a simple recording over a public switched telephone network, or PSTN, with the same recording over a digitally enhanced VoIP network. The enhanced version was noticeably clearer than the standard call.

PSTN has an audio frequency range that tops out at 3400Hz, Gelsinger said, but VoIP will permit "wideband audio" that expands the frequencies as high as 8000Hz, Gelsinger said, meaning that voices sound more natural and are easier to understand.

In addition, VoIP applications will reduce phone call costs, integrate with PC applications and make it easier to translate speech into text.

"This announcement certainly follows a trend these days of further commoditizing voice calls," IDC analyst Richard Shim said.

The Intel representative said the chipmaking giant has publicly announced similar VoIP development partnerships with Cisco and Avaya.

Intel and Skype have worked side by side on VoIP issues before. Along with Microsoft, the three companies sent a letter last September asking the IRS to "refrain from any attempt to extend the excise tax to VoIP services."

 
Correction: This story incorrectly stated analyst estimates of Skype earnings. Analysts estimate Skype's overall valuation could be in the $6 billion to $10 billion range.

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I like Skype...
... :-)
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