Intel Corporation And Verizon Communications Inc. Make A Deal

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After months in the making, tech and telecom heavyweights Intel (NASDAQ: INTC  ) and Verizon Communications (NYSE: VZ  ) formally announced today the long-awaited sale of Intel's video service to Verizon. 

This deal is significant for both Intel and Verizon as it signals, at least in part, various growth opportunities each company has ahead of it in the upcoming years.

So with that in mind, let's take a look at what tech investors need to know about this deal between Intel and Verizon. 

Let's make a deal
Intel had been planning to make a bid at launching its own smart TV service for some time now, but was stymied with a series of roadblocks that illustrate the difficulty in navigating the vested interests within the television industry.

Sadly, it appears Intel's primary roadblock in launching the service came from its attempt to strike licensing deals with many of the key content providers needed in order to compete against other available cable services. As we've seen many times in the past, the television industry is awash with entrenched interests, and they seem to have gotten the better of Intel here. 

This is frustrating for consumers because, although few had actually been privy to actually demoing Intel's set top box service, word repeatedly leaked that Intel's programming software made huge strides in the quality of the overall user experience.  

Hopefully by selling its digital media assets to Verizon, Intel's apparently impressive technology will eventually be brought to market, albeit with someone else's name on it.

Verizon's and Intel's path forward
For Verizon, the deal underscores its recent push deeper into TV and video services, and adds another name to the list of acquisitions in Verizon's bid to become more competitive in content delivery.

Late last year, Verizon also purchased privately held EdgeCast and upLynk. Both companies had developed their own specialization in simplifying and expediting the delivery of online video content. Now by combining its improved delivery capabilities with Verizon's content deals and Intel's attractive software interface, Verizon has positioned itself as a possible serious competitor to cable distributors like Comcast and Time Warner.

For Intel, shedding its once-promising media service, while unfortunate, also represents a shift in focus for the world's largest semiconductor maker as it attempts to tap into key emerging growth markets like the Internet of Things.

Last November, Intel formed a new division to investigate possible market opportunities with the Internet of Things, calling it the IoT Solutions Group . As you can imagine, the potential to put chips in almost any physical item is an exciting business opportunity for Intel, so it certainly makes sense that redoubling its efforts in pursuit of this truly huge market opportunity is in Intel's long-term best interest.

Foolish bottom line
The sale of its new media business to Verizon is by no means an indictment of the technology Intel had developed. Rather, it was Intel simply acknowledging that it isn't necessarily the right company to bring it to market.

Sometimes in business, you have to make these kinds of frustrating choices in order to remain focused in pursuit of greener pastures. That's what Intel was doing with this deal with Verizon, which is something shareholders should certainly be happy about.

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  • Report this Comment On January 22, 2014, at 1:06 AM, badkat7 wrote:

    Once again Intel falls flat on its face in a saga that stretches back to Viiv and Digital home some ten years ago. Intel lurches from disaster to catastrophe without stopping to ask why it keeps making the same mistakes. The answer of course is entirely obvious; the wrong people in leadership positions. They certainly can't blame the rank and file; Intel employs some of the smartest people in the industry. No, this failure stems from a culture dedicated to the orthogonal discipline of a hardware supplier to industrial companies where instead they need a culture that creates software and product for live consumers. Oh Intel, how you break my heart. Again.

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Andrew Tonner

Andrew Tonner is a tech specialist for The Motley Fool. He is a graduate of The University of Arizona with a degree in Finance.

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