Wearable Computing Brightens Long-Term Outlook For Intel
Maxwell is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
If you thought the internet and computers have reached a saturation point in their evolution, think again. Intel (NASDAQ: INTC) is closely working on several technologies that will help us to use wearable and portable computers in the near future. Wearable computers are small electronic devices that can be worn above or beneath clothing. This technology was intended for general as well as special purpose IT.
Wearable computers are gaining traction. Today, they are primarily being used out in the field where other computer devices, such as laptops, tablets and smartphones hinder a workers ability to record data and perform other duties.
There are new examples of wearable computers popping up every day. Sony Ericcson, for example, recently unveiled its new SmartWatch, an Android based smartphone watch which can utilize Google Play apps like Twitter and Facebook.
According to Electronista, the market for wearable computers is expected to hit $1.5 billion in revenues by 2014. If Intel could capture just a piece of this market, it could see a significant boost in its bottom line.
Intel will begin to mass produce tiny chips that can be used in wearable computers, as early as a few years. Wearable and portable computing have wide ranging market scope and almost all market and industrial sectors will begin to adopt Intel's new technology. This will lead to increased sales of Intel's chips and processors, resulting in increased profits and revenue. This will boost Intel's share value in the long-term.
Intel is working on chips that will make it possible to bring "portable computers" to consumer market in less than two to five years. Intel is working on computer chips smaller than their low-voltage Atom processors used in phones and tablets, which can be used to power 'wearable computers'. The chips may have less than half or even a quarter the size of an atom chip. To help reduce the size and power of these small chips, they will not have instruction sets typically found on a microprocessor.
The future of computing and microchips lies in wearable technology. Wearable computers have extensive use in the army, medicine, mining, oil and gas and just about anywhere it is not possible for humans to work safely. With the touch of a finger, pictures and videos can be transferred unchanged from a computer to any smooth surface like that of a bowl, table, or wall. Intel will need to bring wearable technology to mass consumers as soon as possible, as the competition will only grow robust.
The U.S. military is expected to spend a lot more money on landmine removal, on research into bionic arms and limbs and also on clothing for marines that can act as information processors. When Intel will launch its tiny processors and chips, U.S. military will be the first client to order these tiny chips by the hundreds of thousands. My point is, wearable technology and portable computing have huge potentials that may change the way we understand computers, Internet and information processing. Certainly, Intel is at the forefront of this research and development. All this will translate to increased revenue for Intel, as manufacturers and organizations across healthcare, security, military and energy sectors will depend on Intel for its tiny chips.
Intel wants to make it possible to display images of any type on any surface, said Manny Vara, senior technology evangelist at Intel. A system that changes the way we interact with things and makes the images more interactive, according to Vara. Researchers have demonstrated technology, which is still in development, at the European Conference on Research and Innovation Intel in Barcelona last month.
Vara demonstrated the project, called "Display without Borders", with a laptop computer, a Microsoft Connect sensor and a projector. At the beginning Vara expects the technology to be used in homes to show pictures and video, Vara also said he expected it to be useful for businesses, allowing workers to collaborate more easily in a meeting, for example. In time, more uses of this technology will be developed.
If Intel succeeds in developing the "wearable computers" in the short term, this will be a revolution in how people communicate. Moreover, by being the first company to develop this type of product, its profits would be astronomical, because who would not want to be connected in a way simpler than a smartphone?
By 2016 it is expected that this kind of wearable computer reaches the milestone of $6 billion dollars. Other companies that are investing in wearable computers are Google (Smart Glasses) and Apple (Smart Watches). While research costs in the short-term will be a burden on cash flow, the long-term value of R&D in the area of chips for wearable computers will increase the value of Intel stock on a discounted cash flow basis.
Advanced Micro Devices (NYSE: AMD) is not stopping for Intel either. While preparing the ARM chips for servers, AMD announced its fastest line of Opteron chips. The company reports that it continues to strengthen its x86 family. According to John Williams, executive officer of AMD, the new Opteron chips, codenamed Abu Dhabi, are up to 40% faster in processing business applications online than the Opteron 6200. The Opteron 6300 chips come with locks ranging from 1.8GHz to 3.5GHz. According to AMD, the new processors will be faster in virtual machines. However, AMD has not tread into the arena of wearable and portable computing, which still is the domain of Intel.
Meanwhile, Qualcomm (NASDAQ: QCOM) has announced that it is part of a major smart TV alliance. TVs connected with Qualcomm's new system will have a unique base and will allow developers to create applications. The initiative is part of the Smart Television Alliance, a nonprofit association created by TV manufacturers and other companies, such as chipmaker Qualcomm, in June this year. This may be a good move but does not have as much growth and future as something as huge as consumer wearable computers have.
Microsoft (NASDAQ: MSFT) has continued to purchase Intel drivers and processors for its range of products. Considering how important Microsoft is in computer business, we must take this very seriously. Thanks to Windows 8, and its popular Surface tablets, Microsoft has begun to use a lot of Intel processors and chips. The more Microsoft sells its products, the more Intel will continue to make profits.
It was initially reported that Apple (NASDAQ: AAPL) will not use Intel's chips for its Macs anymore. However, it was announced that Apple may begin to purchase Intel chips and completely ditch Samsung, which has provided chips for its iPhones and iPads. Under Tim Cook, Apple's share price has fallen drastically from $700 to around $520 recently. The company's Maps fiasco, troubled relationships with Samsung and Google (GOOG), and frequent announcements of products that break traditional 1 year cycle have all attracted criticism.
Undoubtedly, Intel is the most powerful processor maker at the moment and holds the largest market share. Consequently, Intel has a market cap of $102 billion and an enterprise value of $97 billion. With a profit margin of 22.13%, an operating margin of 30% and revenue of $53.75 billion, Intel is a very powerful company with great benefits for investors. I strongly believe that those numbers will increase when Intel's tiny chips for wearable and portable computers are launched in the mass market. Although the market in general is bearish, Intel is having a great growth in developing countries.
Intel is one stock that we cannot ignore solely because of the amount of interest that ordinary consumers, government establishments, research organizations, consumer goods manufacturers and the military have in wearable and portable computing. The ramifications of Intel's tiny chips are going to be profound and the company will see a vertical growth in terms of profit and revenue. This is one reason why Intel's stock will continue to be a great long-term investment in the years to come.
StockCroc1 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Intel, Microsoft, and Qualcomm. Motley Fool newsletter services recommend Apple, Intel, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!