The world's largest manufacturer of semiconductor products,
) recently announced its plans to launch an Internet-based TV
service and an accompanying set-top box.
The company said that Intel's TV service is expected to
include content from cable TV packages as well as Internet-based
) streaming service. The video service will also be available on
mobile devices such as
The company's intention to manufacture the set-top box (STB)
was revealed in Mar 2012 through a
Wall Street Journal
Intel already makes chips for STBs but its decision to
manufacture the entire box is the first of its kind. The company
has not yet signed any deal with program providers.
Intel is best known as a chipmaker and remains well positioned
in the server segment. However, its main business, that of making
processors for PCs, is witnessing very slow demand as PC sales
are declining and consumers are moving to tablets and
According to research firms IDC and Gartner, the PC industry
was weak in 2012 and is expected to remain weak in 2013 due to
the softness in the memory market (specifically in DRAM), the
ongoing Eurozone debt crisis and weak PC demand. In order to
expand the company's bottom line, Intel has increased efforts to
move beyond the computer industry.
The success of the launch of a virtual cable operator remains
unclear due to the many hurdles associated with it. The high cost
of TV programming channels remains the primary problem. Incumbent
cable, satellite and telecommunications companies already pay
nearly $38 billion per year to license TV channels. Intel may
also have to bear the brunt of higher costs.
Internet bandwidth could be another hurdle. The inability to
guarantee enough bandwidth for high-quality video at all times of
the day could divert the interest of the subscriber.
The chipmaker's foray into this segment may be considered a
milestone. But the competition expected in the field will also be
fierce as many media firms as well as technology companies such
, Microsoft Corp
) are vying for a share of the pie.
Currently, Intel shares carry a Zacks Rank #3 (Hold).
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