Intel Accelerates Its Presence In Wearable Tech By Partnering With The Luxottica Group

Having missed out on the mobile revolution, leading PC chipmaker Intel (NASDAQ:INTC) seems determined to be an early entrant in the next big wave in computing – wearable technology. The company has announced a number of collaborations to accelerate its presence in the wearable tech market, in the last few months. The latest one being a multiyear R&D collaboration with Luxottica Group. Luxottica is a leader in premium, luxury and sports eyewear with over 7,000 optical and sun retail stores in North America, Asia-Pacific, China, South Africa, Latin America and Europe. The company has a wide brand portfolio, including house brands such as Ray-Ban (the world’s most famous sun eyewear brand), Oakley, Vogue Eyewear, Persol, Oliver Peoples, Alain Mikli and Arnette, as well as licensed brands such as Giorgio Armani, Bulgari, Burberry, Chanel, Coach, Dolce & Gabbana, Donna Karan, Polo Ralph Lauren, Prada, Michael Kors, Starck Eyes, Tiffany and Versace. In 2013, Luxottica Group posted net sales of more than Euros 7.3 billion. ^[1]  Intel’s strategic partnership with Luxottica aims to fuse premium, luxury and sports eyewear with smart technology. The first product from the collaboration is expected to launch in 2015.

Earlier this week, a Wall Street Journal source reported that Intel will replace Texas Instruments (NASDAQ:TXN) in the new version of Google Glass, expected to launch next year. ^[2] Google Glass is a head-mounted device resembling a pair of spectacles that allows people to view the Internet and take pictures. The first version of the device used a TI processor, but did not gain much popularity due to its high price and privacy concerns. The device was initially promoted as a consumer gadget but Intel plans to promote the next version as a workplace-computing device, to hospitals and manufacturers.

Some other deals made by Intel in the wearable tech space this year include:

– In March, Intel acquired Basis Science, which specializes in wearable device technologies for health and wellness applications. Basis Science is one of the leaders in health tracking for wearable devices and accounts for around 7% of the market. ^[3] 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.

– In August, 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.

– Intel introduced MICA (My Intelligent Communication Accessory), a feminine fashion accessory designed by Opening Ceremony and engineered by Intel, at the Opening Ceremony Spring/Summer 2015 fashion show in September this year. Priced at $495, the smart bracelet features a 1.6 inch OLED display  and delivers texts, e-mails, and Facebook/Google notifications over AT&T’s 3G network. The fashion accessory will start selling in the United States this month and will retail exclusively at Opening Ceremony New York and Los Angeles, select Barneys New York locations, and online at Openingceremony.us and Barneys.com.

The wearable device market is still at a nascent stage and is quite competitive with everyone from Qualcomm (NASDAQ:QCOM), Texas Instruments, Broadcom (NASDAQ:BRCM) to startups vying to grab a share of this fast growing market. Juniper Research estimates the wearable computing device shipments will 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. ^[4]

Intel currently derives less than 10% of its valuation and approximately 5% of its revenue from the Internet-of-Things segment. We believe that accelerating its entry in wearables augurs well for Intel’s long term growth potential, and estimate the segment to account for approximately 10% of Intel’s total revenue by the end of our forecast period.

See our complete analysis for Intel

Our price estimate of $34 for Intel is at an approximate 10% discount to the current market price.

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1. Intel and Luxottica Group Announce Multiyear Collaboration for Wearable Tech, Intel Newsroom, December 3, 2014 [↩]
2. Google-Glass Deal Thrusts Intel Deeper Into Wearable Technology, The Wall Street Journal, November 30, 2014 [↩]
3. Basis Goes To Intel For Around $100M, TechCrunch, March 3, 2014 [↩]
4. Broadcom Targets Wearable Tech Role, TechWeek Europe, August 30, 2013 [↩]