Move Over, Skype: Intel's Backing Jajah

The chipmaker is throwing its weight behind a service that aims to dethrone eBay's PC-to-PC calling business

by Olga Kharif

For more than two years, Intel has worked with Web-calling leader Skype, but on May 9, the mammoth chipmaker announced a partnership that could make life for Skype a whole lot harder.

Intel (INTC), the world's largest maker of computer chips, said its venture-capital arm, Intel Capital, became the lead investor in a $20 million round of funding for Jajah, a startup that has made no secret of its intent to dethrone Skype. Intel will continue to work with eBay's (EBAY) Skype—for instance, making sure its chips work with Skype software—but it's forging a far tighter alliance with Jajah.

The backing, announced during a demonstration of Intel chips for consumer and business laptops in New York, lets Jajah license 16 of Intel's Web-calling related patents. Among them is the technology that lets users turn a PC into a digital phone without the need for additional gear, such as a headset.

Getting squared away on patents is vital, considering the woes facing Vonage (VG), which is locked in a patent infringement battle with Verizon (VZ) (see BusinessWeek.com, 4/25/07, "Vonage: Away from the Edge, for Now"). Intel Capital will also promote Jajah's service and software, which enables low-priced Web-based calling between phones and PCs, to Intel's business customers.

Don't Wake the PC

Then there's collaboration on product development. Engineering teams from both companies will work on hardware that could debut as early as 2008, says Jajah co-founder Roman Scharf. "We will devote as many resources as we need to get this out as soon as possible," he says. "Internally, we call it Jajah Inside," he adds, evoking Intel's marketing slogan, "Intel Inside."

The idea is to embed Jajah's voice calling features into PCs, so that users can make calls even when their computers are off or asleep. If successful, Jajah would become more user friendly than Skype, which typically requires a PC to be on to work. The newly beefed up service would also mean Jajah users don't have to use headsets or install software. While Skype's application comes pre-loaded on some Dell laptops, the number of such devices is small.

"One of the things that grabbed us about Jajah was the way they developed a better user experience [with higher reliability and quality]," says Stephen Saltzman, director of strategic investments at Intel Capital. Ease of use is paramount, as Internet-based calling spreads. IDC expects the number of users of Voice over Internet Protocol (VoIP) services to rise to 44 million in 2010, from 10.3 million last year.

Communications End Points

At first, customers may simply be able to plug in their regular home phones into PC dial-up ports, and use these phones as they would a regular land line—the difference being that the call is routed over a high-speed connection. Eventually, though, the companies' combined efforts could yield a product that lets users place calls from any device—whether it be a camera, a calculator, or even an alarm clock, analysts speculate.

As that kind of communication gains traction, Intel may be able to diversify more beyond its bread-and-butter PC chips. "This notion that Intel is going to equip PCs is going to change to where they are going to equip end points [of communication]," says Will Stofega, an analyst with consultancy IDC (IDC). Those end points may be home phones or alarm clocks or ultra-mobile PCs, which are a cross between a full-featured computer and a phone. "Jajah has a more futuristic vision," says Stofega.