Intel Partners With Luxottica To Make Smart Glasses

By Markets

Intel (NASDAQ: INTC) recently partnered witheyewear giant Luxottica's (NYSE: LUX) Oakley brand to launch Radar Pace, a pair of smartglasses designed for athletes. The Radar Pace features personalized training programs, tracks heart rate and performance, and guides athletes with a real-time voice activated coaching system.

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The Radar Pace. Image source: Oakley.

The "coach" is powered by Intel's Real Speech voice recognition system, and athletes can use the integrated Bluetooth headset to make calls, dictate texts, or listen to music. But will these new smartglasses succeed where Alphabet'sGoogle Glass failed? Or will it remain another niche product in the market of pricey wearables?

Why Intel is making smartglasses

Intel's partnership with Luxottica isn't its first major move into the wearables market. It previously developed a $1,000 luxury bracelet calledMICA with high-end retailer Opening Ceremony, partnered withFossil to develop fitness trackers and smartwatches, developed biometric earbuds whichmeasure a user's heart rate with SMS Audio, and acquired wearables maker Basis Science to launch the Basis Peak smartwatch.

Intel made all those moves for two main reasons. First, it had to diversify away from the slowing PC and data center markets by expanding into adjacent markets like wearables, connected cars, smart appliances, and other Internet of Things (IoT) gadgets. Second, it needed to widen its moat against ARM licensees like Qualcomm (NASDAQ: QCOM), which dominated the smartphone and tablet markets and threatens to do the same in the IoT market.

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Unfortunately for Intel, the numbers suggest that ARM chips are already winning that battle. Earlier this year, Qualcomm declared thatit already controlled "more than 80%" of the Android Wear market. Apple Watch, the world's most popular smartwatch, also runs on a custom ARM chip, while Google Glass waspowered by an ARM chipset from Texas Instruments.

Google Glass. Image source: Google.

In response, Intel has launched a wide variety of low-power chipsets and modules, like the SD card-sized Edison and button-sized Curie, for IoT and wearable devices. It evenlaunched a TV show, America's Greatest Makers, to promote those chips. Yet Intel's IoT revenue rose just 2% annually, andaccounted for just 4% of its sales last quarter -- indicating that they won't offset its weaker PC chip sales anytime soon.

What this deal means for Luxottica

The Radar Pace is much less meaningful for Luxottica, which controls roughly 80% ofthe eyewear market with its first-party brands Ray-Ban, Oakley, and Persol; its licensed eyewear for top brands like Chanel, DKNY, and Ralph Lauren; and its brick-and-mortar retailers LensCrafters, Pearle Vision, and Sunglass Hut. Oakley is one of Luxottica's top brands, but a single pair of smartglasses probably won't move the needle very much for its parent company.

Therefore, I believe that Oakley's Radar Pace is more of an experimental play which complements the brand's other "high-tech" glasses. Those glasses include itsAirwave ski goggles, which features a heads-up display with GPS, jump tracking, caller ID, and text messaging features, and its Thump MP3 glasses.

Pursuing niche users instead of mainstream ones

Google Glass failed because people didn't like to be secretly recorded, and the design looked awkward. Snap is taking another stab atthe market with its new Spectacles, but that device could also flop due to the same challenges.

That's why other companies are now targeting niche markets instead of pursuing mainstream users. Sony's SmartEyeglass and Microsoft's HoloLens, for example, are initially targeting enterprise users to make their jobs easier.

Intel and Oakley's Radar Pace also follows that example by targeting hardcore athletes and outdoor enthusiasts. It's unclear how many "high tech" glasses Oakley has sold, but it's been selling the Thump since 2004 andthe Airwave since 2012 -- indicating that the same customers might embrace the Radar Pace.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun owns shares of Qualcomm. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, and Qualcomm. The Motley Fool owns shares of Microsoft and has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool recommends Fossil 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.