"Intel's slogan for the next century is going to be Intel inside everything," said Jae Kim, associate analyst for new media consultants, Paul Kagan Associates.
The agreement announced Monday: an alliance with Advanced RISC Machines that accords Intel (INTC) the right to produce, sell, and enhance the Cambridge, U.K, firm's tiny powerhouse processor, the StrongARM. The deal builds on Intel's planned purchase of patents and technology from StrongARM co-creator Digital Equipment Corp. announced last October.
"The StrongARM processors have tremendous potential in the market ... [for] portable devices and other consumer electronics," according to Ron Smith, vice president and general manager of Intel's computer enhancement group.
Both the licensing deal and the Digital deal await the go-ahead from the Federal Trade Commission.
Until now, Intel watchers had expressed doubts about the Santa Clara, Calif., company's strategy for the digital information appliance market. At the company's Fall Analyst Meeting in November, the firm met resistance when it pushed its flagship Pentium -- albeit, with some modifications -- as a panacea for all the markets it competes in.
"The Pentium is not a solution for PDAs and is not very compelling for set-top boxes either," said Jim Turley, senior analyst with semiconductor technology researcher MicroDesign Resources Inc.
One problem is price. A $90 Pentium processor is too expensive to incorporate into a sub-$300 home appliance.
Analysts also said Intel needed a processor that was more power-efficient. They noted that Pentium processors would suck battery power from portable devices such as 3Com's PalmPilot or Apple Computer's Newton faster than vampires suck blood..
Those are two areas where the StrongARM excels. Currently, the low-cost processor finds its way into such gadgets as digital cameras, Internet phones, network computers, and digital set-top boxes. Competitors such as the MIPS processor are providing the brains for Nintendo's Nintendo64 and Sony's Playstation video game consoles, other markets on which Intel has set its sights.
Without the processor, Intel would miss an early opportunity in those next-generation markets, according to Mike Feibus, principal analyst for semiconductor watcher Mercury Research Inc. "If those markets do explode," said "Intel is wholly unprepared to compete, [unless they have StrongARM.]"
Still, Intel says its strategy continues to feature its x86 processing line. "Price alone is an oversimplification," said Chuck Mulloy, spokesman for Intel. "There are a great many other factors when shooting for products outside of the normal PC space."