Intel expands into workstations

Having conquered the desktop business, Intel (INTC) is on the move again into new territory, this time the workstation market dominated by Sun Microsystems and Hewlett-Packard.

To conquer the workstation market, Intel plans to replicate the strategy it has used for desktop PCs and, more recently, in servers and notebooks. To do that, Intel will produce all the core electronics inside the computer's plastic casing: the main processor, of course, but also the specialty processors, chipsets, and the motherboards--the main circuit board of the computer--said Anand Chandrasekher, head of Intel's month-old workstation division.

Before Intel rose to its commanding position in the PC industry, all these other electronic components were made by other manufacturers, companies that have gradually but definitively ceded control over the fundamental design of PCs to Intel. While Intel gains additional income from all of this, the real importance is that it cements Intel's lock on its core processor business. It simply is too expensive for most PC manufacturers to develop and manufacture the core components in a PC these days.

Now, Intel wants to extend this business model to workstations, a high-growth, high-margin market which is ripe for the picking since Intel is now in a position to deliver all the major building blocks of a low-cost workstation. A workstation is basically a high-powered PC, one traditionally designed for engineering, scientific, and financial applications that require a lot of processing power.

Intel is already hooking up with existing workstation makers such as IBM to catapult itself into this industry. IBM recently announced an IntelliStation Z Pro line of workstations based on Pentium Pro processors, an admission of the growing influence of Intel in the workstation business vis-a-vis IBM's own PowerPC processor.

Sources within Big Blue said the two companies will cooperate closely in motherboard development, though Chandrasekher would not comment on Intel's relationship with IBM.

This relationship was evident this week when IBM quietly demonstrated an unannounced IntelliStation workstation that uses a 233-MHz Pentium II processor and a Pentium II motherboard. Intel itself has been conducting demonstrations of workstation-class systems using a 300-MHz Pentium II chip.

IBM officials say the company plans to formally announce an IntelliStation line in the second quarter that uses the 266-MHz Pentium II processor and, possibly as soon as this summer, a 300-MHz Pentium II system.

IBM says the Pentium II processor offers a price-performance mix that the Pentium Pro, Intel's current workstation-class processor, does not. The Pentium II is expected to be introduced in the second quarter of this year, most likely in May.

Intel also plans to use its new workstation division to accelerate the flow of advanced technologies into the mainstream PC market. "It's simple. We'll sell [workstation] building blocks and accelerate the flow of technology to the PC space," an Intel spokesperson said.

Some of the technologies slated for use in Intel workstations that may already be on their way into PCs are Intel's 3D graphics technologies, namely the upcoming Intel740 graphics processor and the Accelerated Graphics Port, Intel's high-speed data transfer technology.

"AGP is clearly very important as part of a balanced system architecture," Chandrasekher said, referring to the need to balance, or increase, the performance of the whole workstation system, not just the processor. A balanced workstation system includes the use of a very-high-speed memory subsystem, high-speed 3D graphics, as well as ever-faster processors.

(Intel is an investor in CNET: The Computer Network.)