Intel to Enter TV Biz - Analyst Blog

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The world's largest manufacturer of semiconductor products, Intel Corp. ( INTC ) plans to launch a Web-based TV service for U.S.consumers, according to the Wall Street Journal .

The chipmaker's foray into this segment may be considered a milestone achievement. According to research firm Gartner, the PC industry was almost flat in 2011 and is expected to remain weak in 2012. In order to expand the company's bottom line, Intel has increased efforts to move beyond the computer industry.

Intel plans to manufacture the set-top box ( STB ) but will not provide Internet service. Intel already makes chips for STBs, so its decision to manufacture the entire box is the first move of its kind. To gauge the total cost involved in this process, Intel has asked for rate charts. However, the company has not yet signed any deal with program providers. It expects to launch this TV service by the end of 2012.

Recently, Sony Corp. ( SNE ) and Dish Network Corp. ( DISH ) had also planned to create such Internet TV services, but none appear to be moving forward immediately.

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. As the costs are increasing, Intel might have to bear even higher costs.

Internet bandwidth could be another hurdle. The inability to guarantee enough bandwidth for high-quality video at all times of day could divert the interest of the subscriber.

Intel is best known as a chipmaker and remains well positioned in the server segment. The company is also selling chips into smartphones, which would be equally capable of receiving any TV service.

Further, the competition expected in the field will also be fierce, with most of the large technology companies foraying into similar Internet-based TV service businesses. These companies include Google, Inc. ( GOOG ), Apple, Inc. ( AAPL ) and Microsoft Corp. ( MSFT ).

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INTEL CORP ( INTC ): Free Stock Analysis Report

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SONY CORP ADR (SNE): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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