Intel (NASDAQ:INTC) is a dominant player in the market for PC and laptop microprocessors, but it was sluggish in entering the mobile market. It is now struggling to gain any traction here. With its core business dwindling, however, Intel has been moving at a furious pace to innovate and get ahead of the market. We have recently seen many of these projects come to light though, which is a good sign for the company and its shareholders. It demonstrates that Intel might be one of the few technology turnaround stories, much like IBM (NYSE:IBM) has been. It is too early to say how successful these products will actually be, but the future certainly looks promising for the company.
Intel announced that it is developing a set-top television box that would use facial recognition software to identify users and target advertisements to them more accurately. This is one of the more aggressive moves from the company. The set-top box would allow Intel to leverage its processing power to analyze the data coming in, so it could determine a characteristic like gender and use this information to better target advertisements.
One possible hang up is that Intel desires to unbundle traditional cable packages for the set-top box. Naturally, the television industry is fighting this transition tooth and nail, but slowly, certain channels are being unbundled. I think Intel's approach to advertisement targeting is quite unique, and it could persuade some content providers to open up. While every advertiser is familiar with Google's (NASDAQ:GOOG) AdWords and AdSense, adding facial recognition would allow targeting to be significantly more personal. In short, the advertisements would be more effective, so this should have a positive effect on the company and the stock.
It should be noted that Intel's approach is much different than its competitors. It is a bold move to openly target advertising and marketing agencies instead of users. We do not know if this is actually the case. If this turns out to be true, however, I would bet that Intel is attempting to leverage these advertisers to force content providers to unbundle. As it currently stands, content providers get paid from individual user subscriptions and from advertising. Most attempts at unbundling content have come from a user perspective, and they have brought slow results. This new focus on advertisers, however, may lead to good results. I would keep an eye on these announcements.
Although it is attempting a transition to television, it is still trying frantically to enter the mobile market. Intel has seen much of the mobile business going to other companies. In a last ditch effort, Intel has made it known that it is not against partnering with Microsoft's (NASDAQ:MSFT) Windows Phone. Although it has made no commitments, this would be a decent partnership for Intel. Windows Phone has received unanimously good reviews, and this may provide Intel with a path into the mobile market, which would help it become a bigger player once again.
Intel has not forgotten its core market, however, as it is pushing hard for new Ultrabook laptops. These laptops are notable for being thin and having a long battery life. Intel is hoping to differentiate these from Apple's (NASDAQ:AAPL) Macbook Air computer. As Intel would get paid for every chip in these computers, it is not surprising that it is putting so much emphasis on this. I do not expect this to prop up Intel's bottom line at all though. In fact, its main competitor in the smartphone market is making a jump to computers, so this is more of an attempt to maintain its business than to expand it.
The company faces competition, therefore, in the phone and computer markets. Intel faces serious hurdles in developing a set-top box as well. Not only do the content providers and cable companies oppose a move to unbundling, but many other companies with deep pockets are developing television solutions as well.
At the moment, the strongest competition is one of Intel's main partners, Microsoft. Prior to Intel's announcement of creating its set-top box, Microsoft announced it would increase the number of "TV-like" advertisements on its Xbox 360 console. The Xbox 360 is already a set-top box of sorts, and it will be easier for Microsoft to expand the offering, as it already has a foot in the market. This means that Intel's offering will not be as significant due to the competition it is already facing.
Google also presents competition, as its notoriously-hushed Google Fiber project recently leaked that it may be getting set-top boxes. This adds to its existing application that provides television services over its Fiber network. Google clearly wants to become a major player in the television industry, and it is using its financial strength to do so. With its high-speed broadband connection throughout Kansas City, Google will be able to offer any product. We will have to wait and see what it does. There is a lot of room for success, but a lot of room for failure as well. I believe this will reduce the hype over Intel's offering once again, but it should have positive effects on Google stock.
In the smartphone industry, competitor ARM Holdings (NASDAQ:ARMH) is dominating Intel, who has yet to gain any decent traction. It recently stated that Intel will be no threat to it, and there are many reasons to believe this. Most notably, ARM produces energy-efficient chips that are necessary for increasing battery life in smartphones and tablets. In contrast to this, Intel's chips have focused on processing power. This has been to the detriment of its sales, and this may reduce the likelihood of Intel making a major move in this industry.
Intel is in a precarious position, and it needs to innovate to counteract its failure to keep up with progress. It is attempting to enter the television market early. If it succeeds, Intel will be in a good position. There is a massive amount of money to be made, but Intel is not attempting this alone. With competition from companies like Microsoft and Google, it will be hard to get to the top of the industry. I expect that Intel will be a player in this market, but it will not be as big as it would like. I still think it will see improvements in the stock market, but these will be minor until it can start to prove itself in more significant ways.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.