Intel ventures beyond PC

“Intel Inside” may be stamped on four out of every five PCs sold, but the world’s biggest semiconductor maker is facing a tough battle to put its imprimatur on the home entertainment device of the future.

Viiv (rhymes with jive) is the new Intel brand set to appear on Windows Media Center PCs from next year and consumer electronics products thereafter.

Its introduction could prove to be an object lesson on how technology companies should break into markets where they have no history of success nor name re-cognition with customers. It could equally become a case study in failure.

“We are coming in the front door, loud and screaming,” says Don McDonald, head of the Digital Home division created by Intel in January. “Our brand means nothing in that space today, our job is to make that brand mean something.”

Viiv, a made-up word that avoids any prior copyright problems, was chosen after extensive testing with consumers worldwide. It will represent a new platform of Intel chips that will feature cooler, quieter processors and chip sets that offer high-quality audio and rapid coding and decoding of video signals.

It is Intel’s second platform after Centrino – the mobile chip set that has been driving growth at the company and adding wireless internet capabilities to notebook computers.

“This is more challenging than Centrino, which was really preaching to the choir – if you had a notebook, this was a better notebook,” says Mr McDonald. “With Viiv you have a product challenge and a marketing and communications challenge – trying to communicate an entertainment product and getting people to do things they are not used to doing is hard.”

To get the message across, Intel’s marketing campaign is expected at least to match the more than $300m spent promoting Centrino.

Intel has changed ad agencies and last November recruited Eric Kim as head of marketing with his first priority being to drive a digital home brand.

Mr Kim is credited with raising the brand awareness and consumer appreciation of Samsung in consumer electronics, serving five years there as marketing chief prior to his move to Intel.

Rob Enderle, industry analyst with the Enderle Group, compares Mr Kim favourably with Dennis Carter, the Intel marketing manager credited with masterminding the Intel Inside campaign in 1991 that made the company a top 10 global brand.

“Intel rather lost its way in marketing after he left. It went through a series of people that had not been mentored by him.

“Kim really has a marketing background and that really seems to have been showcased with Viiv. What I’ve seen of the campaign seems to be well thought through and the imagery is spot on.”

Intel is entering the digital home arena with a tried and trusted partner in Microsoft, whose Media Center Edition operating system will control the entertainment PCs that will first feature Viiv.

Sales of Media Center PCs rose sharply over the summer – reaching 43 per cent of all retail desktop PC sales in August in the US, according to the Current Analysis research firm.

A price drop below the $900 mainly explained the rise, but Intel did not benefit as much as expected with 53 per cent of Media Center PCs being powered by the processors of its rival AMD.

This is giving Intel extra impetus to launch its Viiv brand, according to Matt Sergeant, of Current Analysis. “[After Centrino,] Intel wants to look at a different area of computing that is sagging, the desktop, and see how it can make consumers understand the PC is more than an end point for the internet – it can edit audio and video and let them hook their TVs up,” he says.

Intel’s partnership with Apple, where it will provide chips for its computers from next year, may take it to the next level, according to Charles Wolf, securities analyst at Needham Co. “Windows Media Center hasn’t proved hugely successful, although Microsoft eventually gets it right,” he says.

“But Apple has far more imagination. It is not so PC-centric and it has proved with the iPod that it has a good sense of where the consumer market is going.

“Apple is in the process of reinventing itself as a digital entertainment company and clearly needs an encore. The encore in my opinion is the living room.”

Whatever Intel and Apple may be dreaming up, there is a need to act fast, says Mr McDonald, who talks of a “window of opportunity” of about 18 months.

Forrester analyst Paul Jackson agrees: “It’s all up in the air at the moment. Will Sony’s PlayStation 3 [be a digital entertainment hub], will it be the PC, or will the cable companies turn consumers to this? It will all be decided in the next two years.”

COMPETITORS PROVIDE MAJOR OBSTACLE TO INTEL AMBITION

Something like 86m consumer PCs are forecast to be sold this year, with the figure expected to pass the 100m mark within the next two years, writes Chris Nuttall.

By then, Intel will have its eyes on the 10-fold bigger prize of the estimated 1bn consumer electronics devices being shipped each year.

But its main competitors already have a head start in the digital home.

Microsoft will introduce the Xbox 360 games console in November. It will sit under the TV and has an “extender” feature that allows it to play music and video from a Media Center PC elsewhere in the house.

However, Microsoft dropped Intel in favour of an IBM processor for the 360 and IBM chips will also power the PlayStation 3 and Nintendo Revolution next-generation consoles.

Intel will also struggle to break into the set-top boxes and digital video recorders being proffered by cable companies to consumers.

Texas Instruments launched its DaVinci platform this month, offering a digital signal processor (DSP), hardware and software solution to help consumer electronics manufacturers, including set-top box makers, handle digital video and the intensive and complex task of converting video in different formats.

“What Intel is doing is trying to solve this with the PC and I think increasingly a lot of these problems will be solved without the need for a PC,” says Greg Delagi, TI’s vice president responsible for DaVinci.