Can TV Turn Around This Giant's Fortunes?
Mohsin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The PC industry has been suffering from falling sales for quite a few quarters now. This poor performance is a combination of various factors, and doesn’t mean the industry is dying. The poor global economic conditions have a major part to play in reduced consumer spending and longer upgrade cycles for both individual consumers and enterprises. Moreover, the industry is also under threat from handheld devices, i.e. smartphones and tablets.
Considering that the PC was the single most dominant and widespread technological revolution in the history of humanity, it can be safely assumed that some of the largest corporations around are dependent on the survival of this industry. Intel (NASDAQ: INTC), Advanced Micro Devices (NYSE: AMD), Hewlett Packard (NYSE: HPQ) and Dell (NASDAQ: DELL) are some of the companies hit hardest by the PC's fall. Each of these affected giants has chosen a different strategy to cope with falling sales from their PC-dependent segments.
AMD and Dell suffer the deepest wounds, since they have the least diversified revenue base. AMD is focusing on its graphics segment and inroads into gaming consoles to offset falling sales in the core segment. Dell has tried a number of different things including launching its own smartphone, but has failed to drive revenues. In a desperate attempt the founder has placed a bid to take the company private, I believe it a good opportunity for existing investors to cut losses and get out.
HP has been affected both due to falling sales in its PC segment and poor performance of printing segment. Only a couple of years back, it was one of the largest PC and printer manufacturers in the world. The company has since suffered from a combination of bad acquisitions and lethargic management.
As the leading semiconductor manufacturer, Intel is one of the largest stakeholders in the PC industry. The company has shown a timely and effective response to the falling sales in its consumer segment. It has successfully diversified its existing PC segment by focusing on providing hardware for low power handheld devices.
The biggest rollout in this regard is the latest Surface Pro tablet by Microsoft, which contains an Intel i5 chip. The semiconductor giant is also challenging Qualcomm in the smartphone arena with its Medfield and Lexington platforms. The company will launch its dual-core Atom Z2420 chip later this month, which will target value smartphones. The value smartphones are expected to show a higher growth rate than high-end smartphones due to high demand in economies such as China and India.
Intel is not stopping just here to drive growth, according to recent updates. According to Erik Huggers, vice president and general manager of Intel Media, the company will launch an internet television service later this year. This will put Intel directly in competition with heavyweight cash rich giants such as Amazon, Apple and Google. According to the company, the device is already in the testing phase and negotiations with content providers are under way.
This will be a little different from existing players with smaller and smarter content bundles, customized according to viewer needs. The most amazing feature, at least from advertiser’s perspective, is a camera which will enable the device to post advertisements according to viewer demographic profile.
This is a huge market worth approximately a $100 billion, and even a small stake can be huge in diversifying the revenue stream of Intel. The primary constraint to these ambitions is the ability of Intel to convince the content providers.
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