Markets for the most part have held up. There are a couple of weak areas. The NQ has lagged both the...
Never count Intel out--especially when it pays you 4.2% to wait
03/12/2013 6:54 pm EST
“Never” is a long, long time.
First, Intel announced a slight upgrade on its Atom chip—the Z2580--at February’s Barcelona Mobile World Congress and that was almost immediately followed by news that China’s ZTE, the fourth biggest seller of mobile phones in the world, has decided to use it in some of its new phones. This is an important follow up to Intel’s win with the Motorola Razr I phone last year. Intel still doesn’t have a central position in mobile phone silicon but it is no longer completely locked out of that market and the company even has some momentum. The Atom Z2580 does look like it has closed some of the graphics gap with chips from ARM Holdings (ARM.LN in London and ARMH in New York.)
Second, Intel has beaten out Taiwan Semiconductor Manufacturing (TSM), the largest independent chip foundry in the world, to build chips for Altera (ALTR), a leader in field programmable gate array technology. Altera will continue to use Taiwan Semiconductor to manufacture chips on older production technology, but will move to Intel’s factories when 14-nanometer lines go into production. Taiwan Semiconductor dominates the $30.7 billion chip foundry market, but Intel continues to build shares with recent deals with Cisco Systems (CSCO) and now Altera. Making chips for other companies is a critical move if Intel hopes to capitalize on its huge investment in chip fabs and chip-making technology.
And third, Intel TV. The company is working on a set top box for introduction in 2013. Intel TV has long been a rumor in Silicon Valley but Intel finally con firmed the effort in February. The idea is set-top box, sold directly to consumers, that works with a service that combines live TV, video on demand, and a catch-up component similar to the BBC’s iPlayer that lets viewers watch anything that aired on BBC within the last week. This may sound like just another set top box, like the one you’ve already got on top of your TV from a cable company, but there are significant differences. Intel TV is independent of what broadband pipe you use. Intel TV won’t care if you use coaxial cable, fiber optic cable or wireless access. You’ll be able to switch providers with no effect on your TV service. You’ll be able to move across town or across country and keep the same TV service—just as you do now with your phone number when you switch service providers. It’s build around the concept of cloud-based content from the beginning. (Not surprising given the number of server chips Intel sells already.) So a user might have access to every program for seven days (the BBC model) without having to record then on a home DVR because the content would be available in the cloud. And finally the service would be device neutral with delivery to every display you own from computer to TV to mobile phone.
Do I expect Intel to get Intel TV right from the beginning? Absolutely not. Although I think it will come closer than you might think. You see patient Intel has been down this road before as one of the original partners of the not terribly successful Google TV effort. And more recently the company helped developed Comcast’s (CMCSA) X1 service and gateway device. Comcast is slowly rolling out this next generation platform—universal search; live, recorded and on-demand content; intuitive menus and graphic user interfaces with social media capabilities and personalization capabilities. I’d assume that Intel learned a little something from that effort. And on its track record, the company has the patience to keep chasing the learning curve. Not that it doesn’t have a reasonable amount of experience in building a box that sits in one place, that connects to the Internet, that uses lots of graphic processing, and that relies on multiple processors for multi-tasking and speed.
Sounds kinda like a PC, doesn’t it?
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , I liquidated all my individual stock holdings and put the money into the fund. The fund may or may not now own positions in any stock mentioned in this post. The fund did not own shares of First Intel as of the end of September. For a full list of the fund’s holdings as of the end of September see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/
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