Why Intel Is Embarrassing Itself With A Web-TV Venture

| About: Intel Corporation (INTC)
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This article will delve into the reason that Intel felt it necessary to spend heavily to create an entirely new TV service, when they were not even remotely in the media area.

The next generations set-top box opportunity, told as a bedtime story

Once upon a time there were 2 viciously competitive companies, and each had a virtual monopoly. One, we'll call "I'm inside", owned the microchips, while the other, we'll call "Mr. Softy" owned the operating system, that went into practically all the "smart" devices that attached to the internet. The 2 monopolists cooperated well, and were fat and happy.

Then one day, a little fruit company, that Mr. Softy had mostly destroyed, and mostly forgotten about, out innovated them. Next, a number of other innovative companies, that were on the periphery of the monopolists, all of a sudden became competitors with their own "smart" internet access devices, that did not use the chips, nor the operating system of the 2 monopolists.

But, Mr. Softy had smartly started to diversify years ago into a device that hooked into all the "dumb" TVs. Mr. Softy had realized the viciousness of "I'm inside", and decided that it would be better to not give them another monopoly, in these new TV devices. As time passed, Mr. Softy made the TV devices smarter and more powerful, but refused to allow "I'm inside" to be a partner.

Then one day, Mr. Softy and its 2 competitors in TV devices, all had decided to partner with "I'm inside's" only major competitor, who had also been mostly destroyed, and mostly forgotten about.

That is when "I'm inside" started to panic! You see, "I'm inside" suddenly realized that they would not be inside these new "smart" devices, that would end up being in practically every home in the world, that had a TV, and an internet connection.

Just like the Fruit company had out innovated Mr. Softy, "I'm inside's" mostly forgotten competitor, had also quietly out innovated them.

"I'm inside" went to all its old box maker customers, and told them to make a box that would use the ultra-expensive chips that "I'm inside" had become accustomed to selling, so they could compete with Mr. Softy and the other new "smart" TV device makers.

But, just like the other new mobile "smart" internet access device makers, nobody was much interested in using the ultra-expensive chips that "I'm inside" was telling them to buy.

Frustrated, "I'm inside" decided to build their own TV box. But, it was expensive, and it lacked the capability to play all the great video games, that are available to Mr. Softy's TV box. Furthermore, none of the traditional TV service companies wanted to work with "I'm inside".

So, the vicious monopolist "I'm inside" decided to create their own TV service, and the only box that would be available, would be theirs. What's more, the vicious monopolist "I'm inside" hired a key executive from the media division of their old buddy Mr. Softy, to be the general manager of their TV venture.

"I'm inside" told the world that they would be "revolutionizing" the TV service business, and that their wiz bang TV box was beyond cool.

Then nothing happened.

Then, the general manager that had been hired away from Mr. Softy 2 years before, well, he up and quit.

Then shortly after that, the CEO of "I'm inside" announced he was "retiring". Meanwhile the new CEO hemmed and hawed, but assured everyone that "I'm inside" had a "revolutionary" new box, with incredible technology. Interestingly, "I'm inside" had never ever created a consumer product before.

Why was the vicious monopolist willing to so embarrass themselves with all these outlandish remarks?

Well, in the past, back when the new mobile devices were making another small chip company into a giant with a market cap similar to "I'm inside", they also trumpeted their own competing mobile internet technology, they called WiMax. WiMax turned out to be a huge embarrassment, but the vicious monopolist just pretended it never happened.

Additionally, monopolists somehow think that they can control and manipulate others. "I'm inside" might be delusional enough to think they can stop other box makers from also working with the little resurgent chip maker, who recently hired a few key employees away from the fruit company.

But, Why would more box makers want to work with "I'm inside's" resurgent competitor?

First of all, the little resurgent chip maker had an excellent chip for the price, which was optimized for playing video games, and that was the main heritage of Mr. Softy's box. The other box makers knew that if their box was maybe a little cheaper, or a little better is some way, it could be successful. But, and this is key, it must be capable of playing the games that were made readily available for use on Mr. Softy's TV box.

People, after all, are audio/ visual creatures. Typing on a keyboard to communicate, or for entertainment is not natural.

Watching, speaking, listening, and making gestures, are natural.

While the vicious monopolist was engaged in trying to deal with its new mobile competitors, its old resurgent competitor had been making continual advancements in what I like to call "real world" processing.

It turns out that most people want to see and interact with computers in ways that are more natural.

It turns out that most people want their computers to see, hear, and process real world information, which than can be utilized in more natural ways.

So, while the vicious monopolist had won the first battle, its resurgent competitor, just like the fruit company, had positioned itself better to compete in the next era of computing, and possibly win the actual war.

Conclusion and morals to the story

A vicious monopolist can easily become separated from reality, and then become incapable of seeing what is of the utmost importance.

A monopolist can become so used to dominating others, that they may try to create things that are not in demand.

Their hubris may keep them from understanding simple situations, which even a child could comprehend.

Finally, the left for dead, such as the fruit company, and the resurgent chip competitor, are often better bets for the next round, than a monopolist who is filled with hubris.

Disclosure: I am long AMD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.