Intel Corporation (NASDAQ:INTC) is about to bet big on a new venture that the company hopes will counter the mistakes it’s made in the past. Holders of INTC stock should take notice.
Just to refresh your memory, Intel dominates the PC chip market, but it missed out big on the mobile computing revolution. The company failed to foresee the rise of the ARM processor, which is the chip that powers every “iPhone” and most “Android” devices.
Former Intel CEO Paul Otellini recently revealed in an interview with The Atlantic that the company passed on an opportunity when approached by Apple Inc. (NASDAQ:AAPL) to supply chips for its yet to be unveiled iPhone back in 2007. (Source: “Paul Otellini’s Intel: Can the Company That Built the Future Survive It?” The Atlantic, May 16, 2013.)
Also, in an interview with Fortune, Intel President Renee James said that the company “didn’t appreciate that the iPhone was the advent of mobile and ultra mobile computing.” (Source: “Intel President: Why we missed the mobile revolution,” Fortune, July 14, 2014.)
Remember WiMAX? No? That’s OK. Not many people do, but Intel sure does. The company invested heavily in the 4G technology before losing out to LTE. Think Blu-Ray versus HD-DVD in the high-definition video wars from a few years back.
Both mistakes cost Intel the role of a major player in the mobile device market. If Intel makes another similar mistake, the results will just be embarrassing. But the company is trying to buck that trend.
As such, Intel announced on Monday at the Mobile World Congress that it’s getting ready for the next-generation wireless technology, 5G, which has the potential to be 10–100 times faster than today’s LTE networks. (Source: “Intel bets big on 5G to avoid missing out on mobile (again),” Engadget, February 22, 2016.)
“We are not going for bragging rights,” said Intel Corporate Vice President Aicha Evans. “This is not about smartphones and tablets, this is about devices of the future.” (Source: Ibid.)
It looks like Intel has finally awoken out of its mobile slumber, focusing on what the industry will need instead of focusing on what it thinks it needs, like with the iPhone debacle.
To ensure it doesn’t make the same mistake it did with the WiMAX technology, Intel is not going in it alone this time. Intel is partnering with AT&T Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ), Ericsson (STO:ERIC-B), Huawei Technology Co Ltd (SHE:002502), and ZTE to collaborate and to help test 5G technologies. This will limit Intel’s risk from venturing into new technology territory, since there is no single 5G standard yet and it could be years before a standard is agreed upon.
The Bottom Line on INTC Stock
I like this move by Intel. It’s important that the company starts looking now towards next-generation networks, even if it is a few years off. According to Engadget, the first 5G networks probably won’t pop up until at least 2018. Forrester analyst Thomas Husson has gone so far as to argue that 5G “will have no impact whatsoever for consumers in the next five years.” (Source: “Intel sets out its plans for 5G mobile push,” ZDNet, February 22, 2016.)
But 5G technology is on its way and if Intel can convince mobile device makers that their chips for next-generation networking are a worthy option, expect INTC stock to soar in the coming years.