Shares of Intel ( INTC) and GE ( GE) surged Thursday after the companies announced an ambitious $250 million strategy to target the home health care market. Intel, which is better known for its server and PC processors, has its eye on the booming market for home health monitoring, and is partnering with GE to develop and sell healthcare technology. With the tech sector taking a pounding during the recession, Intel is shrewdly tapping new revenue streams. "We're at an inflection point in health care in this country, and, potentially, globally," said Paul Otellini, the Intel CEO, at a packed press conference in New York City. "Staggering costs of health care are bankrupting families, crippling businesses and dragging down the economy." With health care firms attempting to reduce expensive hospital stays, analyst firm DataMonitor estimates that the home health monitoring market will grow from $3 billion this year to $7.7 billion by 2012. Investors responded warmly to Intel and GE's alliance. Intel's shares rose 95 cents, or 6.32%, to $15.98, outpacing the broader advance in tech stocks that saw the Nasdaq gain 4.49%. GE's stock also climbed, rising 82 cents, or 8.6%, to $10.99.
Intel is making its first foray into the health care market with its "Health Guide" offering, a touchscreen device that uses a broadband link to connect patients with their physicians. Aimed at people with chronic conditions such as diabetes and congestive heart failure, the Health Guide can be used to collect vital sign information such as blood pressure, and it also provides a video conferencing link between health care professionals and patients. Although a clear attempt to tap into Obama's ambitious health care plan, both Intel and GE shied away from politics during the press conference. "I don't view this so much as capitalizing on the stimulus, this is more about driving quality, efficiency, and access for our healthcare," said Jeff Immelt, the CEO of GE. "What will really make this venture take off is not stimulus, but Governments saying that the way healthcare is delivered has to change." By investing $250 million over five years, the two companies plan to collaborate on a number of projects, This will include GE's QuietCare system, which uses wall-mounted motion sensors to monitor the elderly in assisted living facilities. Intel says that it is already working with insurer Aetna ( AET) to deploy its Health Guide system , as well as other U.S. healthcare organizations such as SCAN Health Plan, Providence Health & Services and Erickson Retirement Communities. Overseas, the company is running a pilot in the Netherlands, and regional trials in England and Scotland, potentially opening the door to the U.K.'s vast National Health Service (NHS). However, Intel admits that it could be some time before its nascent healthcare business has a significant impact on the company's earnings. "We're not at break even, we're still at the investment level," said Otellini. "This is not a business that is going to have immediate returns
but it's not a business that is so large that it's going to drag down our P&L."
However, the CEO pointed to GE's extensive "sales machine" as providing a massive boost to Intel's efforts. With an aging U.S. population, Intel and GE's strategy could turn into a major revenue stream during the coming years. The Federal Interagency Forum on Aging-Related Statistics forecasts that, by 2030, approximately 71.5 million people will be 65 and older, representing nearly 20% of the total U.S. population, up from 37 million Americans in 2006.