By DANIEL EISENBERG, MARTY KATZ AND MICHAEL KRANTZ

THE CHIPS ARE UP--AGAIN

With some analysts predicting billion-dollar sales drops for the PC industry this year, and with Oracle dangling a $500 computer in front of consumers, you might expect to find Intel CEO Andy Grove sneaking a peek at other platforms. No chance. Grove's hole card: revolutionary Intel technology called MMX (matrix manipulation extensions) that will load already speedy Pentium chips with a set of fast multimedia instructions. Intel engineers say MMX is the company's greatest advance in a decade--bigger even than the Pentium.

Grove, who was in New York City last week to meet with analysts (word of another profitable year sent the stock up 5% last Friday), offered a glimpse of Intel's plans during an exclusive breakfast with TechWatch at the swank St. Regis Hotel. (Grove brought his own special cereal in a baggie, part of his diet since a bout with prostate cancer.) While Intel is guarding MMX details closely for fear of eating into Pentium sales, Grove promises enough agility and speed to handle glitzy applications, such as video telephony and 3D gaming.

As for predictions of impending devastation in the PC industry, Grove thinks it's unlikely. His basis for that judgment? The same organ that digests his special cereal. "When I first came to this country in the 1950s from Hungary, people were mesmerized by cars. That's the kind of conversation you hear today about computers," he says. "Demand will stay strong." MMX, due this fall, may help.

CONNECT THE BYTES

When it comes to keeping hot new technologies under wraps, sleep-starved engineers often have a Mission: Impossible on their hands. Result: a slew of indecipherable nicknames. Try matching the code names below with the "revolutionary" (and yet to be delivered) products.

A COPLAND:

This heir to the Windows OS throne and prince of vaporware ("due" in '94) is slated for a 1998 debut. 1

B CAIRO:

Netscape's new Navigator, ready to make collaboration and virtual travel easy,should spoil Bill Gates' Christmas. 2

C MERCED:

Apple's long-awaited Mac OS 8 promises a Net-friendly interface in the best Mac tradition by late '97. 3

D DOGBERT:

Intel's 64-bit processor is tailor-made for "tech-heads" who look upon the Pentium as dad's Buick. 4

Answers to the puzzle: A-3; B-1; C-4; D-2.

A FREE CUP OF JOE

The great Internet boom has been fueled by a startling business model: make a great product, then give it away. Browser titan Netscape and search-engine companies like Yahoo distribute free goods, hoping that market share will pay off when the Net supports profitable ventures.

Sun Microsystems is the latest entrant in the freeware sweepstakes. The hot product is Java, the programming language that promises a more interactive Web. At last week's JavaOne conference in San Francisco, Sun's JavaSoft unit unveiled JavaOS, an operating system the company swears will make money--eventually. The plan is to refine Java and give it away to everyone but Microsoft, Apple and a few other companies that will license the OS for a hefty fee.

For users this means more free Web-enhancing software. For developers it means a blessedly level playing field: one of Java's most attractive features is that its applications run under all operating systems, so developers won't have to choose among Apple, Windows and the like.

And for Sun? JavaSoft may make money. But if it doesn't, the Sun spin-off can always turn to Silicon Valley's other form of financial alchemy: the initial public offering, where--hallelujah!--Wall St. values cool, money-losing companies and products far higher than it does firms with predictable, boring profits.

PHOTO OPPORTUNITY

The next winner in the electronics industry's Smaller, Faster, Cheaper, Better sweepstakes may be the Sharp MI-10, the world's first palmtop multimedia communications device. Select attendees of this month's PC Expo in New York City will get an early look at the 1.1-lb. device. It includes such organizer breakthroughs as Web browsing, E-mail and a laptop-quality color screen. But it also offers truly dazzling multimedia applications, like the ability, using a microphone and optional TV camera, to record, edit and E-mail sound and photos. The MI-10 debuts in Japan this month (around $1,500 with the camera) and in America later this year.

--By Daniel Eisenberg, Marty Katz and Michael Krantz