Intel's Side-Door Attack on ARM

Raise your hand if you thought RealNetworks (NAS: RNWK) had gone the way of Napster. Good. I'm glad I'm not the only one.

Last night, the forgotten company, best known for the RealPlayer video playback software made irrelevant by Apple's QuickTime and Microsoft's Windows Media Player, announced a deal to sell 190 patents and 170 patent applications to Intel (NAS: INTC) for $120 million.

RealNetworks is also selling technology it calls a "next-generation" video codec designed to compete with MPEG and H.264 and succeed the old RealVideo specification used by RealPlayer. Other ambitions could include challenging Google's VP8 compression technology.

Whatever the intent may be, Intel's move builds on earlier efforts to broaden its software and services portfolio. Here, the most likely scenario seems to be finding ways to inject faster and more-efficient video compression and playback functions into the programmable logic of Intel's chips. Or at least that seems to be what RealNetworks chief executive Thomas Nielsen is hoping for, saying in a press statement announcing the news: "Intel has a strong reputation as a technology innovator, and we believe they are well positioned to build on the development work and investment we've made in this area."

One specific option might involve beefing up the chipmaker's capabilities for enabling efficient video playback on mobile devices.

Think about it: The rising use of smartphones and tablets has created a video-on-demand boom. Improving the experience at the chip level could give Intel an edge in what have been to date mostly failed attempts to compete with ARM Holdings (NAS: ARMH) in powering mobile devices.

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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Apple and Google at the time of publication. Check out Tim's Web home, portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

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