Despite two consecutive years of write-downs totaling $841 million for venture deals gone sour, Intel Corp. refuses to follow in the footsteps of other major corporations that have shuttered their venture programs. Intel Capital, the company’s venture unit, has already made 10 new investments, five in the United States and five abroad, as part of a plan to invest $200 million in new deals this year.
In addition to its interest in wireless, Intel says its new deals will fall into three other major categories: the digital home, network infrastructure and the enterprise market. Those include technologies that deliver rich content to the home, gaming deals, control plane processors and middleware, optical components, network management, storage and Web services.
Since it is such a large corporation, Intel’s interests are many and varied. That routinely takes Intel Capital into new territory. It closed its first nanotech deal in October, investing about $1 million in Nanolayers. It will also continue to pursue deals in longtime areas of interest, like MEMS (micro-electromechanical systems), sensors, semiconductors and fuel cells.
Intel Capital wrote down $372 million from the value of its $1.1 billion investment portfolio last year, following a $469 million write-down in 2001. The company expects the write-downs to continue indefinitely, says Intel Chief Financial Officer Andy Bryant.
Intel did not report the names of the companies whose valuations it wrote down. Based on its investment history, the write-downs may be in the areas of Internet infrastructure and services and consumer wireless.
Bucking a downward trend in corporate venture capital, last year the early-stage technology bellwether spent $200 million financing 100 deals. That’s in contrast to the $13.3 million the average corporate venture program spent on each of the 3.2 deals it financed during 2002, according to market researcher Thomson Venture Economics (publisher of VCJ). Two-thirds of Intel’s 2002 investments were for follow-on deals and the remainder was new deals. Intel Capital will keep pace with last year’s total this year, but it will add more new deals to its portfolio.
A big chunk of that pie will be spent on deals related to wireless LANs, sometimes called Wi-Fi (short for wireless fidelity) and sometimes referred to as 802.11 in reference to the wireless standard. Although 802.11 is not a new priority for Intel Capital – it made its first investment in the technology in 1996 and now has 11 such investments in its portfolio-its investments in the sector are now coming fast and furious. It has three people dedicated to 802.11 technologies and dozens of scouts in its offices in Australia, Europe and Israel. In October the firm announced a $150 million push into the wireless sector, all in anticipation of Banias, the name of the first microprocessor Intel has designed specifically for laptops.
“802.11 is rapidly becoming adopted as the wireless standard for networking,” says Mark Christensen, vice president and director of Intel Capital’s communication sector. “The innovation is there, the price points are there and it’s becoming ubiquitous in notebooks.”
Intel’s wireless strategy is about linking laptops to wireless LANs. It will invest in companies that develop ease-of-use technologies, a category that includes billing and provisioning of services. It also will invest in makers of intelligent infrastructure and companies that will deploy and manage wireless networks. Intel also is looking for investments in technologies that make wireless networks ubiquitous, meaning technologies that allow users to log onto the Internet or a corporate Intranet from virtually anywhere.
Intel is not just a chip giant. It’s a major force in the venture capital industry and has promised to not step back while the technology market falls further into depression. Maybe it should consider changing its tag line from “Intel Inside” to “Intel Everywhere.”