Earlier this week, Intel (NASDAQ:INTC) completed its acquisition of Basis Science which specializes in wearable device technologies for health and wellness applications. Intel did not disclose the terms of the deal in its press release, but according to TechCrunch the company paid approximately $100 million for Basis Science. 
Basis Science is one of the leaders in health tracking for wearable devices and accounts for around 7% of the the market.  It manufactures the Basis band, the world’s most advanced health tracker which helps analyze sleep patterns, motion, heart rate, calorie, perspiration and skin temperature. Available for $199, the device is compatible with iOS devices and some Android smartphones via Bluetooth. The Basis band will continue to be sold through existing retail channels after the acquisition.
The continuing decline in PC shipments has impacted Intel’s revenue growth in the last two years. The company made a comparatively late entry in the fast growing mobile computing space, due to which it does not (yet) have a very large presence in the market. However, the microprocessor manufacture is keen to be an early entrant in the wearable gadgets market, which is considered to be the next big thing in computing (after mobile). The wearable technology market is estimated to have crossed $4 billion in 2013 and is predicted to more than double by 2018. 
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Intel highlighted its increased focus on the Internet-of-things last year when it formed a new division (New Device Group) that focuses exclusively on wearable tech, embedded sensors and other emerging product categories. The company claims that its strategy is to create wearable reference devices, SoCs and other technology platforms ready to be used by customers in development of wearable products. It showcased some reference wearable devices at the Consumer Electronics Show in January this year.
The acquisition of Basis Science provides Intel an immediate entry into the wearable devices market. The company intends to build upon this foundation to deliver new products that offer greater utility and value to its customers. The wearable gadgets market is still at a nascent stage but with Apple’s rumoured smartwatch, Samsung’s Galaxy Gear 2 and Google’s recent Android Wear products including the Moto 360 by Motorola and LG’s G Watch, is bound to grow at a fast pace. Qualcomm (NASDAQ:QCOM, Texas Instruments (NASDAQ:TXN) and STMicroelectronics currently provide the majority of sensors for wearable devices.
We believe that accelerating its entry in the Internet-of-things augurs well for Intel’s long term growth potential.
Our current price of $27 for Intel is at a approximate 10% premium to the current market price.Notes: