Remember the octopus? Nearly a century ago, novelist Frank Norris came up with that image to refer to big businesses that, through cross-ownership agreements, gained effective control of whole industries. But the term isn’t just a musty reminder of the age of J.P.Morgan. It’s highly relevant today, in the highest of high-tech sectors-computing.
Is Intel the “Octopus” of the Information Age? Or has the world’s most profitable manufacturer simply found a better way to sponsor innovation?
These are the key questions about Intel’s audacious program-of unprecedented scale in the history of American business-to invest hundreds of millions of dollars each year in scores of small companies based on hot new technologies. In the past three years alone, Intel has invested a cool billion in hundreds of projects around the world. Intel rarely plays a direct role in management and usually invests about $3 million per pop.
But Intel isn’t playing Good Samaritan. The company says it hopes the investments will give its own researchers a view of the high-tech horizon and a chance to catch the next great waves of innovation. Intel’s CEO, Craig Barrett, says its venture-capital investments can bear more fruit than “putting a group of 50 [Intel] researchers into a building in these spots.” The company invests in more than semiconductor technology-including research into the Internet, communications, software and video technology.
As with its industry-leading microprocessors, Intel is a pioneer in this approach. The company is essentially extending the make-or-buy decision to research. Its tactic reflects the belief that doing all of your own research has its drawbacks. Besides the cost, there is the risk that in-house teams develop a “not invented here” syndrome.
That won’t happen to Intel, says Stephen Nachtsheim, who oversees the company’s investment program. Nachtsheim says the company wants a supplement for its own research and development, not a substitute. He lists four priorities for Intel’s investments:
Expand existing markets: Intel wants to support companies that come up with new uses for chips.
Gain new “process” expertise: The ability to make chips, which is growing harder as the chips grow smaller, increasingly distinguishes leading chip concerns from the also-rans. “By investing, we can help companies deliver these process technologies to us faster than they might otherwise,” Nachtsheim says.