Intel Maps the Route to Information Superhighway

IF all chief executives had the kind of 1993 that Intel's Andrew Grove is having, they might be tempted to take it easy.

Since January, he has:

* Seen sales of his high-end 486 microprocessors boom. Intel Corporation just announced a record $2 billion in sales for its first quarter. Even this week's move into the 486 market by competitor Advanced Micro Devices is not expected to make much of a dent in Intel sales.

* Begun shipping its next-generation chip, the Pentium.

* Pledged to spend $1 billion to build a brand new semiconductor factory in New Mexico - the first of two such plants the company expects to announce this year.

So is Mr. Grove thinking about springtime in Santa Clara? Hardly. He is plotting to put his phenomenally successful chipmaker through another revolution. In the mid-1980s, Intel moved out of memory chips into microprocessors - a decision that transformed the company and probably saved it. Some Intel officials think the current transformation could be equally as dramatic.

"The stuff we build will be increasingly nodes on a communications network," Grove says. In other words, computers will embrace the telephone. Information superhighway

This convergence of computers and communications is part of what is called the "information superhighway." In this vision, data will flow freely among devices that combine the capabilities of today's computers, telephones, and televisions.

If personal computers are to make this transition, then the microprocessors that run them will have to connect to the outside world like a telephone. Grove says he wants to build "the eyes and the ears of the computer," not just its silicon "mind."

"We will still be a microprocessor company, but you will see our focus on a much broader area," adds Dave House, Intel's senior vice president of corporate strategy. The company aims to place its chips in all aspects of the emerging world of computer-communications - from new generations of telephones to the hand-held communicators that several companies are rushing to build.

Intel faces some formidable competition from Motorola, AT&T, and other companies with far more experience in telecommunications. But the chip manufacturer is cementing alliances. It has already struck deals with two of the Baby Bells - Bell Atlantic and Ameritech - to help create the digital replacement of today's analog phone system. The company has also signed deals with telephone equipmentmakers Siemens/Rolm and Ericsson.

Perhaps Intel's reported deals with software giant Microsoft will play an even greater role in the company's transition.

The push to build the information superhighway is coming from two directions. On one end are telephone companies, which have high-speed switches and national networks to carry vast amounts of data over long distances. On the other end are cable-television companies. They have created thousands of high-capacity local networks that link directly into the home.

Think of it as telephone companies owning the interstate highways and cable companies owning the local streets. What is needed are on-ramps and off-ramps to connect the two. Computers as connectors

The computer industry hopes to become the connector. Apple and IBM are looking to form joint ventures in this arena.

But the combined efforts of Intel, the world's largest semiconductor company, and Microsoft, the world's largest software company, could become a dominant force in setting the standards.

Intel has already confirmed it is working with Microsoft and General Instrument to build a "smart" box for cable TV. The box would harness computer power to make cable TV far more versatile - a far cry from today's decoder boxes, which sit on top of many sets.

Intel and Microsoft are also reportedly working with AT&T, Northern Telecom, and Siemens/Rolm to merge computers and telephones. The joint effort should create standards that would allow personal computers and private branch exchanges to use the same software.

Intel officials would not discuss the specifics of these ventures. But Mr. House promises that the company's strategy will become clear this year as it makes several deals public. "You will see products in the notebook wireless area - this year," he says. "You will see a lot more technology cooperative announcements."

One product that has been announced is Intel's Smart Video Recorder. The product allows PCs to capture video images and compress them in a single step. Compression allows computer users to store video easily and, just as important, the potential to transmit it, says Claude Leglise, Intel's video-brand marketing director. Although the market will take off slowly, he adds, businesses will enhance their communications with video and audio.

"The objective is to turn the computer into a communications device," Mr. Leglise says.