Intel is to pump money into embedded Linux software developer MontaVista to encourage development of OS and application code for its XScale processor.

Chipzilla's investment in MontaVista was announced yesterday, part of a $23 million cash injection from a number of VCs. The size of Intel's investment was not revealed.

XScale is the follow-up to Intel's StrongARM chip, aimed largely at mobile devices and embedded systems. Intel's investment, like its stake in LynuxWorks (formerly known as Lynx Real Time Systems), operates at two levels: it’s about promoting software development on one of its processor platforms, ideally resulting in greater chip sales. It also operates as a straightforward VC investment - the embedded space is highly lucrative, and Intel is banking on MontaVista growing significantly through is efforts in that market.

Income from smart investments is a growing part of most major IT companies' revenues, as they use spare cash to seek later rewards by banking on potential IPO successes.

Embedded Linux still has a certain financial lustre. Intel's investments in Linux companies include stakes in TurboLinux, SuSE, Red Hat, VA Linux Systems and eSoft. ®