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Losers and Winners of the Next Standard War

By Anders Bylund – Updated Apr 6, 2017 at 11:49AM

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The high-def revolution has been very, very good to Silicon Image, but the salad days are coming to an end.

The HDMI standard's days may be numbered.

The digital audio/video cables that connect your high-definition TV to Blu-ray players, cable boxes, and video game consoles are getting long in the tooth. Though a major improvement over bundles of separate video and audio signal wires, the handy HDMI standard does have a few problems of its own. Chief among them: limits on cable length and costly cables.

A cross-industry coalition seeks to take care of those issues by replacing HDMI wires with bog-standard Ethernet cables. That's the cheap and plentiful wiring standard you'll see connecting your cable modem to your computer, or hanging like sheaves of plastic spaghetti around any corporate data center. The new HDBaseT cable standard would supply high-definition audio and video signals alongside data networking and a bit of power, carrying all of it as far as 300 feet without losing signal strength.

While great for consumers, this is a scary proposition for Silicon Image (Nasdaq: SIMG), which makes a living out of the HDMI standard but doesn't have a stake in Ethernet cables. Fortunately for Silicon Image, the HDMI format has become deeply entrenched in the consumer electronics experience. Buy a TV or set-top box from Sony (NYSE: SNE), Samsung, or Philips (NYSE: PHG) today, and you'll see HDMI connection ports for sure. Unfortunately for the company, Sony and Samsung are among the founding fathers of HDBaseT, too.

If the new standard catches on, it's still not an instant death sentence for Silicon Image. TV sets and their media-wrangling accessories would surely pass through a few years of providing both the old standard and the new, just to give consumers a chance to make a gradual switch. That would give Silicon Image a chance to jump aboard the HDBaseT bandwagon, or perhaps turn to other business ventures.

Still, the arrival of a seemingly superior standard threatens to damage Silicon Image in the long run, making it a dangerous stock to own. Besides, this is not the only potential threat to HDMI out there: Intel (Nasdaq: INTC) has introduced a wireless solution for the media transport problem. If you liked Silicon Image for its exposure to the rise of high-definition home entertainment, you might want to look into a sector cousin like Dolby Labs (NYSE: DLB), which profits from the trend regardless of the connector you use.

Got any other bright ideas to share in the high-def space? Share them in the comments box below.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Intel is a Motley Fool Inside Value choice. Dolby Laboratories is a Motley Fool Stock Advisor recommendation. The Fool has created a covered strangle position on Intel. Motley Fool Options has recommended buying calls on Intel. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.

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Stocks Mentioned

Intel Corporation Stock Quote
Intel Corporation
INTC
$27.52 (-1.96%) $0.55
Sony Corporation Stock Quote
Sony Corporation
SONY
$68.43 (-1.37%) $0.95
Dolby Laboratories, Inc. Stock Quote
Dolby Laboratories, Inc.
DLB
$68.01 (-2.27%) $-1.58
Koninklijke Philips N.V. Stock Quote
Koninklijke Philips N.V.
PHG
$15.86 (-4.23%) $0.70

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