January 6, 2004 9:00 PM PST

Intel fund to bolster consumer electronics

Intel has created a $200 million venture capital fund to invest in start-ups and small companies that specialize in technology for the home.

The Digital Home Fund, which will be managed inside Intel Capital, will help hardware, software and networking companies in the consumer arena get off the ground.

BridgCo, which designs chips for media adapters, and Musicmatch, which makes software for organizing digital soundtracks, will receive money from the fund. Intel invested in these companies before the fund was created, but they are being grandfathered into the fund, an Intel representative said.

Consumer electronics has become the rallying cry for the PC community. Dell, Gateway and Hewlett-Packard are getting into the market for televisions and music players. Microsoft, Intel, Sony and others, meanwhile, are working with film studios and music producers to establish standards for exchanging and playing media files over home networks.

A number of announcements from these companies will come out of the Consumer Electronics Show, which begins Wednesday in Las Vegas with a keynote speech from Microsoft Chairman Bill Gates.

PC companies have tried, and mostly failed, to colonize the consumer electronics world before, but adherents say this time the outcome will be different. These companies understand how to design and sell products such as LCD (liquid-crystal display) televisions, because they aren't much different than the LCD monitors they already sell, according to PC executives.

PC companies also claim they can react more quickly to price and technology changes than the traditional consumer electronics powerhouses.

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"The PC industry is much faster than (the consumer electronics industry). The key differentiator used to be time to market. Now it is volume," Peter Weedfald, senior vice president of strategic marketing for Samsung Electronics America said in an interview last year. "This is a huge opportunity. The consumer electronics industry has grown by leaps and bounds."

Early successes in consumer electronics include Apple Computer's iPod and Gateway's emergence as a leader in plasma TV sales.

Although Intel hopes to achieve returns on these types of investments, the primary goal of the company's venture arm is to jump-start markets that will increase the demand for microprocessors, flash memory and other products that Intel manufactures. Last year, for instance, Intel made its first venture investments in Russia, one of the fastest growing regions for high-tech gear.

"As more entertainment and educational content becomes digital, people want to edit, manage and access that content and share it among multiple devices including TVs, stereos, PCs and handhelds," John Miner, president of Intel Capital, said in a statement.

This isn't the first specialty fund the company has created. Intel put together a $250 million fund that invested in companies that created software for its Itanium processor and a $500 million fund to support its communications group, which is currently losing money.

Last October, the company created a subfund in its communications fund for investments in Wi-Fi companies.

 

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