Intel Corporation (INTC) Leaps Into The Cloud

intelJon Markman:  Surely you remember Intel Corporation (NASDAQ:INTC). It is still the largest U.S. semiconductor maker, but has curiously faded from prominence.

It was once at the top of the heap, riding the wave of desktop computer upgrades and exploiting its part in the WinTel alliance for all it was worth. Yet those days have passed.

Businesses began migrating to a thin client, cloud-based computing model years ago and consumers moved to mobile. While Intel has built a modest cloud microprocessor business, companies in the vanguard have been adept at cobbling together custom hardware to suit their needs and snubbing the giant. Intel’s efforts in mobile failed miserably, culminating with a humiliating exit in April.

But late last month, Intel took one giant step forward with the acquisition of a Russian software company that helps computers see.

Indeed, the addition of Itseez, a startup led by Intel alumni Victor Erukhimov and Sergey Molinov, will help it develop facial-recognition software for security solutions and image recognition for drones and self-driving cars. In fact, Itseez algorithms have made considerable progress identifying traffic signs, lane markers, and pedestrians to help autonomous cars avoid accidents.

Doing that algorithmically is much more difficult than you would think. Humans quickly recognize the difference between obstacles that are dangerous and those that are harmless. For example, humans easily figure out that rain or bugs hitting the windshield are harmless.

A computer has to first identify the obstacle, classify its threat value based on all that it knows about rain or insects in the real world, make an informed decision and then automate. And that’s an easy example. Consider the dilemma when the obstacle is a deer, or worse, a human being. These are complex problems we humans, for all of our foibles, are better at solving than computer algorithms.

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Morgan Stanley estimates self-driving cars will lead to $507 billion in annual productivity gains worldwide, so competition is fierce. Carmakers are scrambling to implement systems.

Intel, with its longtime support of Linux, held an early advantage given the automotive industry preference for open standards. The Linux Foundation release of Automotive Grade Linux should further that lead.

The most notable rivals are Qualcomm (QCOM), NXP Semiconductors (NXPI) and most importantly, Nvidia (NVDA). Intel’s strong history in computer graphics and modular approach is gaining traction in the industry with carmakers such as Tesla (TSLA).

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