Intel Chases the Cloud a Second Time
July 30, 2008
I wrote about Convera’s present business in vertical search here because I heard that Intel was going to chase clouds again. But before we look at the new deal with Hewlett Packard (the ink company), Yahoo (goodness knows what its business is now), and Intel, let’s go back in time.
Remember in late 2000 when Intel signed a deal with Excalibur? Probably not. Convera was the result of a fusion of Intel’s multimedia unit and Excalibur Technologies. When this deal took form, Intel had 10 data centers.
An Intel executive at the time was quoted in Tabor Communications DSstar saying:
We are creating a global network of Internet data centers with the goal of becoming a leader in world-class Internet application hosting and e-Commerce services, said Mike Aymar, president, Intel Online Services. The opening of a major Internet data center in Virginia is a key step toward this goal. We’ll bring our reliable and innovative approach to hosting customers running mission-critical Internet applications, both in the U.S. and around the world.
Part of the deal included the National Basketball Association. Intel and Convera would stream NBA games. These deals were complex and anticipated the online video boom that is now taking place. The problem was that Intel jumped into this game with Convera technology that was shall we say immature. In less than a year, the deal blew up. The NBA terminated its relationship with Convera. By the time the dust and law suits settled, the total price tag of this initiative was in the hundreds of millions of dollars.
Outside of a handful of Wall Street analysts and data center experts, few people know that Intel anticipated the cloud, made a play, muffed the bunny, and faded quietly into the background until today.
Intel is back again and demonstrating that it still doesn’t have a knack for picking the right partners. The big news is that Intel, HP, and Yahoo are going to tackle cloud computing. The approach is to allow academic researchers to collaborate with industry on projects. The companies will create an experimental network. In short, risk is reduced and the costs spread across the partners. You can read Thomson Reuters’ summary here.
Will the chip giant’s Cloud Two initiative work?
Sure, anything free will garner attention among academics and corporate researchers. Will the test spin money for the ink vendor and the confused online portal? Probably not.
Rounding up more cloud computing suspects.
But there’s another angle I want to discuss briefly.
Intel pumped money in Endeca, a well-regarded search and content processing company. You can refresh your memory about that $10 million investment here.
Is there a connection between this investment in Endeca and today’s cloud computing announcement from Intel? I believe there is. Intel is making chips with CPU cycles to spare. Few applications saturate the processors. With even more cores on a single die coming, software and applications are lagging far behind the chips capabilities.
Before the Convera implosion, Intel explored putting text processing functions in silicon. The idea was that the spare cycles could be used to perform some of the processes that choked search systems a decade ago and still create bottlenecks today. Intel wants to accomplish several things; for example:
- Play a role in the coming boom in cloud computing. Instead of just selling chips, Intel wants to get in the value-added business, using its chips to deliver new services
- Find out if “search on silicon” works and can drive new revenues; for example, putting “search on silicon” in a new line of devices
- Get a larger piece of the action as Microsoft builds out its data centers and expands its need for more capacity. Since Dell lost its most favored vendor role at Microsoft, HP has been a big beneficiary of the Dell flub. Intel figures that getting chummy with HP can goose high end chip sales to HP.
In the many posts written about this Intel Cloud Two play, it’s useful to keep in mind that Intel is taking another turn at bat. The Intel agenda is to boost its revenue and diversify its revenue stream. The need for new revenue is crucial to Intel’s success now that that AMD appears to be in a death spiral.
Will Cloud Two lead to search on Intel chips, new revenue from cloud services, and a hunger for silicon with 64 or more cores on a single die? I think the odds are against Intel. HP makes a lot of noise about its dominant role in consumer computers and its success in selling expensive servers to folks like Microsoft. But at the end of the day, HP is still an ink company struggling to keep its revenue from going south. The $1.2 billion paid for Exstream Software is an example of the urgency HP executives feel. You can read about the Exstream deal here. Yahoo is a work in progress, and I have read about Yahoo’s state of the art data centers and the rest of the baloney about the company’s next generation infrastructure. I don’t buy it. The company has a collection of “stuff” that is not tightly integrated.
I want to keep my eye on Intel and its new super star team mates. My hunch is that we’re looking at another Convera in the making. Agree? Disagree? Please, set me straight.
Stephen Arnold, July 30, 2008
Update: July 31, 2008: TGDaily’s “Intel to Lose Its Lead in Chip Manufacturing Tech in 2009, Sort of” by Theo Valich may add some highlights to Intel’s Cloud Two play with the odd couple, Hewlett Packard and Yahoo (my goodness, Yahoo). You can read the full article here. The key point is that TSMC may beat Intel to the punch with 32 nanometer trace technology. If true, Intel has to stir up the clouds as one way to help keep its revenues from being blown off course by a strong westerly.
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2 Responses to “Intel Chases the Cloud a Second Time”
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Stephen, happy to set you straight. While I can see how you associate Endeca with pre-restart Convera because of the shared Intel connection, the companies have little else in common.
Let me excerpt a couple of paragraphs from a 2006 article about Convera (http://www.washingtonpost.com/wp-dyn/content/article/2006/07/16/AR2006071600588.html):
Since 1991, the company has lost more than $1 billion. Most of the loss came in 2001 when it was forced to write off more than $900 million in an ahead-of-its-time venture with Intel Corp . to make archived video content available on the Web. That project, one of the most overblown and short-lived hype cycles in local technology history, virtually collapsed within six months of being announced — but not before Convera’s share price went from $30 to more than $65, ballooning the company’s market value to more than $1 billion before it came crashing back to earth. As of Friday, Convera was worth about $300 million. Its peak revenue year was 2000, when it had $51 million. Last year, it had $21 million.
Condo, speaking from Sun Valley on Thursday, didn’t try to spin the company’s history. “The business model around which we had built [the Intel venture] failed,” he said. “The whole world pretty much collapsed on us.”
Compare this to Endeca, which had over $100M in revenue in 2007, before taking any money from Intel. While I’m can’t comment in detail about Endeca’s financials, I can assure you that we are not losing money.
You are right to see a connection between Intel’s multi-core strategy and Endeca: Endeca’s analytics-based approach to information access takes much better advantage of CPU evolution than conventional search engines, and hence positions Endeca as a poster child for multi-core chip architecture (which is distinct from cloud computing). That’s a good reason for Intel to see Endeca not only as a good financial investment, but also as a strategic partner.
Your blog is always an interesting and provocative read. In this case, I suspect you were just trolling to see if an Endecan would come out and dispute the absurd comparison. š
Hello, Dan,
Not really trolling. Just following my editorial policy of capturing information in a chronological way for my own purposes. The Web log allows me to share ideas and rumors–subject to the stated editorial policy and disclaimer on my About page. In this case, the Intel Cloud Two initiative is interesting. Add to that the investment in Endeca, which is a parallel to the Intel study team’s investigation of other search technologies in 1998-1999 prior to Intel’s amazing Excalibur deal, one of my sources drew the parallels to my attention. I appreciate your providing color, but I think there will be more to the “on silicon” side of the story once the engineering team at Intel is allowed to publish. Right now, Intel is keeping a low profile, which is standard operating procedure. There appear to be some deep parallels between Intel’s research and Google’s that I find interesting. The tie up with Yahoo is very interesting, but the server and core count seems low to me.
Stephen Arnold, July 30, 2008