Intel's Online TV Pain Could Be Verizon's Gain

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Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

After snapping a four-day winning streak yesterday following a less-dovish-than-hoped Federal Reserve meeting, stocks are little changed this morning. The S&P 500 and the narrower price-weighted Dow Jones Industrial Average are both down about 0.3% as of 10:10 a.m. EDT.

Two Dow components, chipmaker Intel and telecommunications carrier Verizon , may be about to ink a deal that highlights the challenges associated with marrying content and medium.

Yesterday, All Things D reported that Intel is in advanced talks with Verizon to cede control of Intel Media, an online subscription TV service -- mere months before it was due to launch. The project, which is now almost three years in the making, saw 300 Intel employees develop a branded Intel set-top box for a pay-TV service that was to be named "On Cue." But its long-term viability within Intel was put into question at the end of June when new CEO Brian Krzanich said:

We believe we have a great user interface and the compression-decompression technology is fantastic. But in the end, if we want to provide that service it comes down to content. We are not big content players.

Put simply, Intel has mastered the technology, but without content that technology has no value to consumers. It now appears that the chipmaker was unable to secure deals with TV networks to provide programming content; by last month, Intel was reportedly reaching out to Amazon and Samsung as potential partners to help fund and distribute the service.

Online pay-TV was an odd strategic leap for Intel, which -- as Mr. Krzanich made clear -- has no experience in content (or even in selling a consumer service.) Companies like Amazon and Apple, which are much better positioned to decipher this market, are still trying to figure out the right model.

Verizon, on the other hand, is a more suitable candidate to leverage Intel Media's assets. As All Things D notes, the carrier "already serves up conventional pay TV to more than five million subscribers via its FiOS unit, and sells broadband access to nearly six million subscribers." Verizon also launched a DVD rental and streaming-movie service, Redbox Instant, this year.

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The article Intel's Online TV Pain Could Be Verizon's Gain originally appeared on

Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool recommends, Apple, and Intel. The Motley Fool owns shares of, Apple, and 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.

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