Why Can’t Intel Be Cool Like Apple and Microsoft?

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Aside from the Apple (NASDAQ: AAPL) shareholders who bought the stock when it was above $480, Apple is still pretty cool to everyone that uses their products. Sure, the coolness of Microsoft’s (NASDAQ: MSFT) new commercials and products is still debatable, but the coolness of the 3.3% dividend is not.  So the real question is why can’t Intel be cool like Apple?

Intel (NASDAQ: INTC) already has the 4.2% dividend, making them cooler than Microsoft. Technically speaking, Intel was cool back in the '90s, when the share price increased from under $2 per share to over $73.

Microprocessors are great and all, but you can barely see them, and servers are the opposite of sexy. Intel is inside most of our gadgets already, but now it’s making a pitch to come inside our homes too, with a new business unit.

Don Clark of the Wall Street Journal reported that Intel confirmed its plans to offer a paid Internet video service and accompanying set-top box. He described it as an “unusual gamble” for a chip maker that has rarely marketed directly to consumers.

Intel’s move is only unusual in the sense that they haven’t done it before

At this point, the gamble remains to be seen, because we don’t know how much money Intel is going to invest. However, we are free to speculate on how large the opportunity may be.

Intel’s chips will power a set-top box containing a high-definition video camera, microphone, and facial recognition technology.

Who knows, Intel’s potentially cool new subsidiary (to be named later) combined with (insert name here) may be the perfect cooperative/alliance to take from the plates of Comcast, Time Warner Cable, AT&T, Verizon, et al.

Don’t be afraid to fool around with the idea try inserting Apple, Google, Microsoft, or Netflix, all of whom are vying for the next great television platform.

Skeptics point to hurdles on content and licensing rights  

Apparently, the skeptics have not taken Clayton Christensen’s course at Harvard or read his book, The Innovator’s Dilemma, because this move is right out of his playbook.

  • Incumbents that don’t evolve, go away.
  • You must set up new business units to go after the opportunity; you can’t do it from within the mainstream business.
  • In order to catch the next wave, you must create a new business model.

Erik Huggers, head of newly minted Intel Media, noted that many content companies were approached before his group conceived the service.  The content guys had input on its features, rather than consulting them after the fact.  He says:

"We have been working hand in glove with the industry to figure this out."

Which only makes good sense.  You would think that a sophisticated company like Intel does its homework ahead of time; maybe the skeptics are not giving them enough credit?

When launched, the product will offer a proper television experience: choice, control, and convenience. According to Huggers, Intel has the silicon, software, knowledge and know-how to create an incredible product:

“If there were a platform that could offer everything they had in mind they wouldn’t do it.”

According to the WSJ article, Intel Media has hired a team of veteran digital TV specialists that will be operating as a largely separate unit with separate offices from the rest of Intel. This fresh, new brand to be named later, will be backed by Intel’s war chest and cash flow. Assuming the right team is in place, Intel can successfully grow any type of business they want.

The content criticism seems overblown

There are tons of creative people who are unemployed right now, and the employed talented professionals can be lured away for a price. Content can be created or purchased. Look at the latest risky-move by Netflix, releasing 13 episodes of House of Cards all at once: how unusual.

This particular brand of original content is going to be more than a mini-cash cow for Netflix. Xbox is a gaming console that is morphing into a media device for Microsoft: how unusual.

Bottom line

If the risk versus reward is favorable for Intel, they don’t have much to lose, and the potential upside for cracking the code and bringing a disruptive technology into the home could be enormous. What appears to be an "unusual gamble" on the surface may lead to something really cool once you dig a little deeper.

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