If the deal is approved, Dialogic, which had revenue of $293 million last year, will become a wholly owned subsidiary of Intel folded under its Enterprise Server Group. Dialogic claims it has a 64 percent share of the market for computer-telephony components, focusing on X86-based servers that provide data and voice services, replacing traditional private-branch-exchange systems. Dialogic also makes cards and software for fax, speech recognition and IP telephony systems.

"This merger strengthens Intel's position as a key supplier to the converging Internet and telecommunications industry," said Craig Barrett, president and chief executive officer of Intel in a prepared statement. "Our goal is to make Intel-based servers the foundation of e-business and communications applications based on integrated voice and data networks."

Besides providing new avenues for sales of Intel servers, Dialogic offers integrated voice/data networking services that could be a boon to a new business in Web hosting Intel announced at an analysts' conference in late April.

Microsoft has also expressed interest in the growing computer telephony business. The software company licensed Dialogic's computer telephony software and took a 5 percent stake in the company in March.

Intel said it does not anticipate any changes to Dialogics's product lines or manufacturing agreements if the acquisition is approved. And Dialogic workers will continue as employees of the new subsidiary.

"Intel and Dialogic share a technology vision and a commitment to standards that make this merger a natural evolution for us both," said John Miner, Intel vice president and general manager of the Enterprise Server Group.

"The merger benefits Dialogic and its customers by broadening our products and services to accelerate the emergence of high-value, open communications servers and solutions," said Howard Bubb, Dialogic's president and chief executive officer, who will join Intel as a vice president of the company's Enterprise Server Group and president of its Dialogic subsidiary.

Previously, Bubb had estimated the market for PC-based computer-telephony systems will grow to $500 million by 2004.Under the agreement, Intel will begin by June 7 a cash tender offer to acquire all the outstanding shares of Dialogic common stock at $44 per share. The board of Dialogic has approved the definitive agreement and has unanimously recommended that Dialogic stockholders tender their shares. Dialogic founders and board members holding approximately 33 percent of the outstanding shares have agreed to tender their shares in the offer.

The deal is Intel's second major acquisition in the communications field this year. In March, the chip maker said it would acquire Level One Communications Inc. (Sacramento, Calif.) in a $2.2 billion stock swap. That bid was Intel's largest acquisition to date and is poised to net the X86 maker a wide array of LAN and WAN semiconductor expertise. Under that deal, Level One is expected to effectively become the merchant semiconductor arm of Intel's network communications group under Mark Christensen.