Eyeing Web phone on a chip, Intel invests in Jajah

A screenshot of Jajah.com, taken on May 9, 2007. Web-based phone-calling company Jajah Inc. has won Intel Corp.'s backing for its bid to blur the distinction between phones and computers, the two companies said on Wednesday.

SANTA CLARA, California (Reuters) - Web-based phone-calling company Jajah Inc. has won Intel Corp.'s backing for its bid to blur the distinction between phones and computers, the two companies said on Wednesday.

Jajah, which has more than 2 million users of its free or low-cost global calling service, said Intel Corp. has agreed to marketing, patent and distribution deals with it and Intel's venture capital arm is leading a $20 million financing round.

"Computers are becoming phones and phones are becoming computers," Jajah Chief Executive Trevor Healy said in an interview.

The deal gives Jajah access to Intel's sales channel of thousands of dealers, personal computer makers and software developers, and could lead to Jajah becoming a desktop icon on PCs later this year, Healy said, although no plans are set.

Over time, Jajah hopes to see its Internet phone-calling technology being embedded into microprocessors, or so-called central processor units (CPUs) -- Intel's main business.

"It is our intention to bring a best-of-class, next generation solution to the market which will be embedded in any CPU for use on any computing device," Jajah co-founder Daniel Mattes said in a statement, without elaborating further.

Jajah encourages consumers to use its service through a Web browser. But, with Intel, it is now looking at reviving an early version of its software that runs on PC desktops.

Intel Capital's undisclosed investment was one of six new investments totaling $31 million it announced on Wednesday at its annual CEO Summit in Carlsbad, California. A second strategic Jajah investor will be revealed later.

Other investments were in China's largest social network company, 51.com, and Chinese chip designer Phoenix Microelectronics; two Israeli companies: Aternity, a maker of application management software, and portable computing firm Ceedo, and U.S.-based education network Tutor.com.

Intel Capital President Arvind Sodhani said his venture firm invested $1.07 billion in 91 deals during 2006.

PHONE SOFTWARE ON A CHIP?

Jajah was founded by two young Austrian entrepreneurs but relocated to Mountain View, California, in Silicon Valley, at the urging of its original outside investors, Sequoia Capital.

Jajah is one of the best-known startups in the market for Web-based phone services, where consumers can call overseas for free, or at a fraction of conventional prices, on mobile or land-line phones, bypassing steep carrier toll charges.

Such companies have evolved from older calling-card phone services. Voice-over-Internet (VoIP) players have emerged with names like Grand Central, Jangl, Jaxtr and Rebtel that offer various twists on the theme. They form a new class of rivals to market leader Skype, now a unit of eBay Inc..

In an increasingly crowded market, Jajah sees access to Intel's intellectual property as crucial. It aims to license 16 of its patents covering VoIP and "softphones," or software-based phones that run on computers, Healy said.

"Intel have a very good patent portfolio around softphones on computers, particularly one for a phone-like interface on a personal computer," Healy said in a phone interview.

He sees Intel's U.S. patent #7120140 for a "digital browser phone" -- governing interaction of phones on PCs -- as especially strategic. "This will give us more freedom to innovate," Healy said.

Funding by the Intel-led group marks Jajah's third outside investment round. It took $9 million in two earlier rounds from venture capitalists Sequoia Capital and Globespan Capital.

Stephen Saltzman, Intel Capital director of strategic investments, said his company had no products to announce but Jajah has generated much interest among Intel product groups.

Jajah plans to use the funding to accelerate development of new products for global markets, and Healy said it aims to sign up 5 million customers by year-end.