For Intel, One Good Friend Isn't Enough

Microsoft isn't the only standard-bearer in the computer business. Software alone does not a computer make, and when it comes to standard PC hardware, the world looks to Intel Corp. Its microprocessors are at the heart of most IBM-compatible personal computers.

But Intel's power isn't rock-solid. For starters, unlike Microsoft, it has lost share in its core business. Clonemakers Advanced Micro Devices Inc. and Cyrix Corp. have already snagged 62% of the market for Intel's aging 386 chips and are getting ready to sell clones of the 486 as well. Their presence has forced Intel to adjust its marketing plans in the past two years, accelerating the shift from 386 to 486 chips.

'SIMPLICITY.' Intel could be in for more adjustments as Microsoft, its partner since the dawn of the IBM PC in 1981, spreads out. Windows NT, scheduled to appear this June, will be the first Microsoft operating system to run on chips other than those that are Intel-compatible. For starters, NT will also run on the Alpha AXP chip from Digital Equipment Corp. and the R4000 line from MIPS Computer Systems Inc., now owned by Silicon Graphics Inc. These are RISC (for reduced instruction-set computing) chips, the type of speedy design that since 1985 has been challenging Intel's dominance.

Microsoft says the RISC deals are to satisfy customer requests and don't indicate a change in the relationship with Intel. "Our cooperation with Intel is far more advanced than it is elsewhere," says Carl Stork, the Microsoft manager who works with hardware makers. For instance, Microsoft still designs its operating system fastest on Intel chips.

For his part, Chief Executive Officer Andrew S. Grove points out that Intel is not completely dependent on Microsoft software, either. OS/2 and Unix are already available on Intel chips and NeXT Computer Inc.'s NextStep and Sun's Solaris soon will be. And, says Ronald J. Whittier, vice-president and general manager of Intel's software technology group, most customers aren't likely to switch to RISC hardware for NT because that would require buying all-new applications programs instead of keeping existing programs as owners of Intel-based NT systems will be able to do. "The thing Corporate America wants is simplicity," he says.

RISC FACTOR. Where Intel could be vulnerable, however, is in the market for network servers, a key objective for Windows NT. These machines, which feed centralized information to personal computers over a network, are replacing minicomputers and mainframes in corporations. And that means they're replacing large computer software, not desktop software. In that market, Intel has no advantage, and buyers can look for the best performance. That means RISC chips, which generally run about 50% faster than Pentium, Intel's most powerful chip yet, due out this March. "Would we look at other platforms in the future? Sure," says Edward F. Driscoll, an assistant vice-president at CIGNA Systems, which buys computers for the insurer. "The key is what happens at the server end."

If the RISC chips start to invade Intel's turf on servers running Windows NT, they could soon move toward desktops. And that could shake Intel's hold on the computer market. Microsoft, on the other hand, would still be selling software for all those machines.

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