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Comms chips

Intel's Luck

3:30 PM -- So, Intel Corp. (Nasdaq: INTC) really is keeping network processors, even after selling its optical networking business to Cortina Systems Inc. on Friday. (See Intel Hands Off to Cortina.) For now, anyway.

Yes, the IXP line is probably still losing money, but it's a reasonable gamble for Intel. And it means the storyline continues on one of my favorite anecdotes from the bubble.

It turns out Intel discovered network processors by accident in the corners of Digital Semiconductor, the former DEC unit that Intel acquired in 1998 for $585 million. We heard this back in 2000, at an Intel media dinner hosted by Mark Christensen, then the VP in charge of Intel's communications division. He told us that as Intel officials rummaged through the business, they stumbled onto this funny parallel-processing side project.

Immediately, it went on the scrap heap. But Christensen, suspecting Intel had found something worth rescuing, took the concept to one OEM who called the device a miracle -- exactly what systems vendors (relatively plentiful back then) needed.

At the time, Intel was only interested in superstar products -- billion-dollar kinds of ideas. So Christensen had to fight hard, and he did tell then-CEO Craig Barrett that it would take at least a five-year commitment -- but he got Intel to keep the network processor business.

It's turned out tepidly for Intel so far, but you've got to applaud Christensen's foresight and initiative. At the time, this looked like a great move, and it gave Intel an entry into what would temporarily become one of the hottest segments in semiconductors. Applied Micro Circuits Corp. (Nasdaq: AMCC) spent $4.5 billion in stock to break into the business by acquiring MMC. Intel got in for free.

— Craig Matsumoto, Senior Editor, Light Reading

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