Intel Looks Set To Make A Mark In Wearable Technology

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Intel (NASDAQ:INTC), which is a leader in PC and server microprocessors, was a late entrant in the mobile computing space and for this reason does not (yet) have a very large presence in the market. However, the computing giant is keen to become an early entrant in what is touted to the be next big wave in computing – wearable technology. The company has been investing in a wide range of start-ups in the wearables space, and has also tied up with some fashion houses to market wearable gear as a fashion accessory rather than just a device that monitors your health (and more).

Last week, Intel unveiled the smart bracelet developed in collaboration with Opening Ceremony – MICA (My Intelligent Communication Accessory) – at the Opening Ceremony Spring/Summer 2015 fashion show. It also announced its collaboration with Fossil, which specializes in consumer lifestyle and fashion accessories, to develop innovative wearable technology for the fashion-conscious.

The wearable device market is still at a nascent stage but is expected to grow rapidly over the next few years. Intel currently derives less than 10% of its valuation (as per our estimate) and approximately 5% of its revenue from the Internet-of-Things (IoT) market. With the expanding growth opportunities in this segment and Intel’s focus on rapidly expanding its footprint in the market, we believe IoT’s contribution to the company’s total revenue can double over our review period.

Our price estimate of $33 for Intel is marginally lower than the current market price.

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See our complete analysis for Intel

Wearable Technology Is The Next Big Wave In Computing

Wearable devices, clothing and accessories incorporating computer and advanced electronic technologies, is a subset of the IoT market. Juniper Research estimates the wearable computing device shipments to increase from 15 million units in 2013 to 150 million units by 2018. ABI Research forecast the figure to cross 450 million units during the same period. [1]

The smart watch was one of the earliest wearables to hit the market, with companies such as Sony (SmartWatch), Samsung (Galaxy Gear), Pebble, and many others selling their variants in the market. Even Qualcomm (NASDAQ:QCOM) released its own smart watch last year. Apart from smart watches, there is a huge opportunity for wearable devices in the medical and fitness space. Additionally, there are numerous other areas and devices where wearable technology is useful and applicable. For example, just to list s few, we cite:   jewelry with proximity detection, baby socks that monitor sleep patterns, clothing that can cool and, many more.

Intel’s Foray In The Wearable Technology Market

Earlier this year, Intel acquired 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 market. [2] It manufactures the Basis band, the world’s most advanced health tracker,  which helps analyze sleep patterns, motion, heart rate, caloric activity, perspiration and skin temperature. As per Tech Crunch, Intel’s CEO recently announced that Basis Science will release a new version of its device sometime this year. [3] Last year, Intel invested in Thalmic Labs, which is a developer of the Myo, the gesture control armband.

Last month, Intel partnered with the The Michael J. Fox Foundation for Parkinson’s Research to create the technology and software to better monitor and treat Parkinson’s disease using wearable devices. The company has also partnered with renowned rapper 50 Cent to create fitness-tracking headphones. [4]

We believe that accelerating its entry in wearables augurs well for Intel’s long term growth potential.

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Notes:
  1. Broadcom Targets Wearable Tech Role, TechWeek Europe, August 30, 2013 []
  2. Basis Goes To Intel For Around $100M, TechCrunch, March 3, 2014 []
  3. Intel’s CEO Envisions A Future Where Wearables Don’t Look Like Wearables – And It’s Not That Far Away, Tech Crunch, August 30, 2014 []
  4. Intel Is Covering Its Bases In The Wearables Market With A New Wearable For The Fashion Conscious, Forbes, September 3, 2014 []