Intel Corporation Primed for the Internet of Things

The chip giant has tremendous opportunities in mobile, but don't discount its upside in data centers and big data.

Mar 18, 2014 at 3:00PM

Trying to find a single, conclusive definition of the so-called Internet of Things (IoT) is nearly impossible, but in general terms it involves marrying technology with our day-to-day lives in ways unimagined even a few years ago. Smart houses, cars, and clothes, in addition to phones and other mobile devices should, if IoT takes hold as planned, make our lives safer and easier.

The Internet of things will also result in unprecedented amounts of data that savvy businesses will utilize in a multitude of ways. According to new research from Gartner, IoT will have a, "transformational effect on the data center market, its customers, technology providers, technologies, and sales and marketing models." Gartner also suggests the IoT market could generate incremental revenue of $300 billion by 2020, much of it in data centers, an often overlooked strength of Intel (NASDAQ:INTC).

With great power, comes great responsibility
If knowledge is power, IoT has the potential to change the business world if, and Gartner's research indicates this is a big if, there are adequate data centers and analytic tools available to process all that information. How many data centers? By 2020, IoT "will include 26 billion units" used to collect, assimilate, and ultimately utilize, in real time, all that data.

Like today, collecting and using that much information brings with it significant challenges. First and foremost is security of the enterprise information (big data) and customer data. There are already examples of major security breaches, like Target's infamous snafu.

Data storage, enhancing server technologies, and syncing a growing data center network are also cited by Gartner as key challenges facing companies that want to play in the IoT ballpark.

Intel's getting its IoT ducks in a row
When Intel CEO Brian Krzanich took the helm last May, he made it clear from day one that Intel needed to shift its focus to new, cutting edge technologies like mobile and, "more novel fields," including wearable devices. It was Krzanich's definitive strategy to move Intel away from its reliance on the dying PC market that was, in large part, responsible for him getting the top job.

In fact, Intel Chairman Andy Bryant alluded to Krzanich's plans to move Intel from "the very low end of computing to the very top end of computing" as the impetus for the board's decision. And strides are being made in the mobile market, including the recent unveiling of the 64-bit Atom processor and new LTE platforms. Though, joining the party as late as it did, Intel has a ways to go in mobile.

But IoT is still in the early stages of its adoption, and Intel is laying the foundation for snaring a piece of that $300 billion in incremental revenue. Advances on the big data front, including Intel's new Xeon processor which, according to Intel, not only delivers 80% better computing performance, it does so at a total cost-of-ownership that's 80% less than the prior iteration.

An expanded relationship with Alcatel Lucent and networking giant Cisco (NASDAQ:CSCO) to, "accelerate network function virtualization (NFV) and software defined network (SDN) technologies" is another significant step in capturing IoT market share. The alignment with Cisco in particular, with its large, existing networking client base and commitment to IoT and big data, should really help Intel jump-start its own growth efforts. The two IT behemoths have partnered for years, and it's not hard to see why expanding that relationship to gain market share makes sense: their technologies and services dovetail perfectly for delivering end-to-end IoT solutions.

Final Foolish thoughts
The day of Intel's last earnings release on Jan. 16, its stock was trading at $26.54 a share. After an initial drop to close at $25.85 a share the following day, Intel shares have hovered in the mid-$24 range, largely because of concerns about its shift to new markets taking hold. But investors seemed to have glossed over an important aspect of Intel's 2013 earnings : while PC Group revenues were down 4% compared to 2012, its Data Center unit – the area that will benefit from the expected surge in IoT revenues – is already growing, up 7% to $11.2 billion last year, and 8% in Q4 2013.

In the near-term, Intel stock is likely to meander until shareholders see signs of mobile growth, and therein lies the opportunity for longer-term Fools. Mobile's coming, and IoT offers Intel an almost unlimited upside in the coming years, and that's where the opportunity is. Enjoying Intel's 3.6% dividend yield along the way should help make the wait a little easier to tolerate, too.

Another IoT alternative for the growth investor
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.


Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems, Gartner, and Intel. The Motley Fool owns shares of Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information