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Intel and Nokia make first step to forming mobile internet axis

Nokia to use Intel's chipset in WiMAX devices

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Comment The announcement that Nokia would use Intel chips in its forthcoming WiMAX devices was hardly unexpected, given that the two giants have been working together for more than two years in this area.

But it is still very valuable for Intel to have gained a firm contract rather than just a development partnership, since it has looked at risk of creating a market where, in the early stages at first, other chipmakers would reap the revenues.

More broadly, the Nokia win sets out the strategy that stands the best chance of reshaping the wireless industry in the internet image, with the chief representatives of the PC and the cellular heritage coming together to create a new breed of devices that will be optimised both for broadband web services and for mobility.

Nokia will use Intel's Baxter Peak chipset in its N Series Internet Tablets, the first WiMAX handheld Nokia plans to ship in 2008. Intel, Nokia and Nokia Siemens also announced an interoperability agreement that will ensure interoperability between Nokia Siemens' WiMAX and Nokia devices based on Intel chips.

The main WiMAX products from Intel are Rosedale 2, which is not fully wave 2 compliant but supports both fixed and mobile standards; Montevina, the next generation of Centrino Duo, which will offer integrated Wi-Fi and WiMAX for notebooks and UMPCs, and is supported initially by Lenovo, Acer, Asus, Panasonic and Toshiba; and Baxter Peak, a handset/PDA chipset.

Montevina incorporates the Echo Peak Wi-Fi/WiMAX chipset and also features integrated HD-DVD/Blu-ray support. As an interim solution, designed to seed the WiMAX market, Intel has also developed Dana Point, a single-mode WiMAX chipset that will be placed in PC cards.

Why Intel and Nokia should team up

It has always been logical that Nokia and Intel should cooperate to ensure that their vision of the mobile internet, which has many points in common, defines the next generation of communications. Their conflicts of interest are short term, while their mutual interests are long term and highly strategic.

Previous attempts to join forces, notably in HSDPA PC cards, stumbled on those conflicts – notably Nokia's continuing reliance on the cellco customers, whose business models are threatened by the flat rate, open access approach of the PC/IP world as represented by Intel; and the competition of the two companies to shape the mobile internet device itself, as enshrined in Nokia's Wi-Fi/Linux Internet Tablet and Intel's Ultramobile PC (UMPC) architecture.

On the first count, while the cellcos will remain Nokia's largest customer base for many years, it knows that in the open internet world, its power will be diminished. It will face competition from a wider range of operators with non-traditional models – potentially new clients for Nokia – and they will be forced to adapt to the open web anyway, as 3 and others are doing.

The faster these two developments take place, the better for Nokia, since in the open internet, the brand and functionality of the device hold sway, not those of the bit pipe carrier. Also, it will be able to accelerate its own moves to become a web services provider, with offerings like Music Store and Navteq that can bypass cellcos altogether.

All this puts Nokia in the Intel camp more firmly than ever before, especially in the US where it has failed to gain significant market share or carrier favours. And this could lead, in turn, to a rapprochement as the two join forces to define the mobile internet device architecture, rather than competing on this.

Intel will inevitably dominate the WiMAX laptop market, but in handsets and other devices its success is far less assured, and the support of a Nokia would be a turning point. Intel has failed in cellphones before – and last year sold its XScale operations to Marvell – and even in WiMAX, the specialist chip designers are steering clear of taking on the giant in notebooks, but are exploiting its inexperience in low power gadgets to come up with offerings that look, at this stage, more attractive than Intel's own.

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