Voice, Datacom Snag Intel’s Attention –

SANTA CLARA, Calif. – To complement the launch of Intel Corp.’s new network platform, the company in early September created a $200 million venture fund dedicated to investing in voice and data communications deals.

The newly formed Intel Communications Fund will invest in companies developing software based on Intel’s new Internet Exchange (IX) Architecture, which allows operating systems designers to add new audio and visual communications functions. Such businesses include basic communications component manufacturers, real-time operating system developers and software tool providers.

The Intel Communications Fund will receive all of its capital from Intel, unlike the Intel-64 Fund launched last spring (VCJ, July, page 5), which included limited partners such as Hewlett-Packard Corp., Compaq Computer Corp., Dell Computer Corp. and NEC Corp. There are no immediate plans to add outside investors to the new fund, but an Intel spokesman did not rule out the future possibility.

“The objective was to launch [this fund] as quickly as possible,” said Keith Larson, the director of corporate business development for Intel’s networking communications group and acting manager of the new fund. The company wanted to introduce the fund concurrent with the launch of its IX Architecture, he explained.

Intel is one of the oldest corporate venture investors, having been joined in the last year by companies such as cable operator Comcast Corp., software developer Seagate Technology Inc. and computer manufacturer Oracle Corp. The $250 million Intel-64 Fund has made about a half dozen investments since its inception. Over the past decade, Intel has invested in about 275 companies, which were valued at approximately $3.5 billion at the end of June, the company estimated.

The Communications Fund is Intel’s third VC vehicle, joining the Intel-64 Fund and the company’s business development coffers, from which it has made strategic investments.

The Communications Fund will make minority investments, typically of less than $10 million each, but Intel’s venture investments historically have been in the $3 million to $5 million range. Larson noted that the company preferred to co-invest with professional venture capital firms.

The new fund had not made any deals by press time. Intel will appoint an in-house candidate as a permanent fund manager in the near future.