Market Spotlight: WiMax and chip makers

Sprint Nextel Corp. and Clearwire Corp. announced earlier this month they would combine their wireless broadband units to form a $14.6 billion communications company that would develop and market high-speed mobile Internet service based on WiMax technology.

Similar to the WiFi service found in coffee shops and airports, WiMax covers a much larger area and promises download speeds far faster than current wireless networks for video, games and other data services.

Intel -which invested in the project along with several others -is slated to work with manufacturers to put WiMax chips in laptops containing its Centrino 2 processors and other Intel-based mobile Internet products. Intel and fellow investor Google Inc. also have options to enter third-generation and fourth-generation wholesale agreements with Clearwire and Sprint.

Jefferies & Co. analyst John Lau said Intel's move to put WiMax chips into laptops is similar to what the company did in the past to promote the spread of Wi-Fi technology.

"We believe that Intel will include WiMax capabilities into their notebooks by the end of this year; this will spur demand for WiMax," Lau said.

Lau thinks the company's efforts to promote technologies like WiMax and Wi-Fi are intended to promote overall computing. These efforts "are not material to their revenue or their earnings, but as a technology enabler this will definitely impact their microprocessor sales," he said.

Other companies are poised to gain from Intel's involvement in the deal as well, said Raymond James & Associates analyst Hans Mosesmann.

Mosesmann said Intel may make WiMax chips initially, but he thinks it will eventually buy them from someone else.

"They would outsource that because that's not their strong suit," he said.