February 13, 2001 4:45 PM PST

Intel to phase out streaming services

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Services just aren't Intel's cup of tea.

About a week after the chip giant closed a Web hosting service for small and medium-sized businesses, the Santa Clara, Calif.-based company is turning the lights out on its Internet Media Services (IMS), a dedicated network for streaming media broadcasts.

With IMS, Intel hoped to sell airtime and services to companies that wanted to broadcast stockholder meetings, training courses or other events over the Web. When it was unfurled in May, the company said it would invest approximately $200 million into creating a worldwide streaming backbone.

Unfortunately for the company, success proved elusive. Intel landed only a few customers, including Golf Magazine and sports Web site Quokka.com, and never established itself as one of major players in the market.

In addition, the streaming business has not grown as fast as the rosy projections of 2000. Back then, media analysts were touting that the streaming-for-hire services would constitute a $2.5 billion dollar business by 2004.

In the past few months, however, streaming companies have scaled back near-term revenue projections because of the downturn in the U.S. economy. Digital Island, one of the larger streaming services companies, saw losses in its most recent quarter in part because of increasing costs and a decline in dot-com customers.

An Intel spokesman would not specify how much money Intel invested in IMS up to this point, or how much revenue it generated. However, he did say the profit picture had changed since the service was first announced.

"We didn't see a timeline to get to profitability that would be adequate for Intel," spokesman Bill Calder said Tuesday. "Because of changes in market conditions, we see a lengthening of the timeline to profitability."

Intel sent a memo to customers discussing the termination of the service. After customers are helped to find new providers, the service will be shut down in the second quarter, according to the memo.

The demise of IMS will also no doubt add fuel to the debate over Intel's strategy to diversify. Since 1998, the company has been on a mission to increase the number of markets in which it participates. While some of these efforts have begun to pick up steam, others have fallen flat. In this effort, the company has bought more than 20 companies and invested more than $7 billion.

Both IMS and the e-commerce hosting division were part of the New Business Group, the most experimental of all of the new Intel divisions. Rather than concentrate on silicon, the group, run by Intel General Manager Gerry Parker, tries to come up with services and other projects. One of its biggest projects to date has been Intel Online Services, a Web hosting/services organization that competes with Exodus.

Calder said that neither IMS nor the canceled e-commerce hosting services was part of the Online Services group.

 

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