Is Apple's 64-Bit A7 Processor A 'Gimmick'? No, But It's Not The Next 'Big Thing' Either

Oct.28.13 | About: Apple Inc. (AAPL)

Apple (NASDAQ:AAPL) introduced 64-bit processing to mobile with its A7 processor in the new iPhone 5s and included the A7 processor in its new iPads introduced October 22, 2013. Apple and its loyal fans pointed to the A7 as a major breakthrough and SA author Ed McKernan wrote an excellent article extolling its benefits for Apple.

Based on Ed's 20 years at Intel, he is in a good position to comment and his article points to the business and strategy of Apple's move over time.

At the same time, Anand Chandrasekher, Qualcomm's (NASDAQ:QCOM) chief marketing officer and once the head of Intel's Atom CPU unit called the 64-bit ARMv8 (NASDAQ:ARMH) instruction set used by Apple's new processor "a gimmick."

It creates an interesting controversy and from the comments on SA I will add that retail investors often need a "catchphrase" to point to as a rationale for their enthusiasm for a particular stock, and in the case of Apple, the comments on the A7 processor suggest that a "64-bit processor" is nothing short of sensational.

Let me say at the outset that it is an impressive advance. It is not, however, a new idea, innovative, or a breakthrough in technology.

64-bit processors have been around since I was in university, which was well over 40 years ago. In the 1970s and 1980s they were found in Cray computers, DEC Alpha's and some IBM processors. A 32-bit system can address 2 raised to the 32nd power addresses, so it is limited to 4GB of Random Access Memory ("RAM"). For all intents and purposes, since a 64-bit system can map into 2 raised to the 64th power addresses, it may as well be unlimited in the amount of RAM the system can utilize.

For those who consider 64-bit a major advance, keep in mind that the Nintendo 64 and the SONY PlayStation 2 both had 64-bit processors a few years ago.

Microsoft (NASDAQ:MSFT) released its Windows XP 64-bit OS in 2001 and Apple's OS X "Panther" released in 2003 supported 64-bit computing.

You can tell if your operating system is 64-bit in Windows from the System Properties page such as this clip from 2003 Version of XP.

The "breakthrough" if anyone wants to use that term is that Apple was the first to use a 64-bit architecture in a mobile phone, paving the way for phones having more than 4 GB of RAM.

Intel iCore processors today are all 64-bit processors. They support both 64-bit and 32-bit operating systems. They have been in the market for some time.

Click to enlarge

I don't want to diminish the progress Apple has made. Their move to 64-bit processing paves the way for having desktop class processing power on smartphones and their move to put the A7 on their iPads brings them up to the level of the Windows tablets in the market using Intel iCore processors.

For those of you who thought Apple's A7 processor was the best thing since sliced bread, all I can say is that I was never that impressed with sliced bread. It certainly was progress. It was not an earth shattering development.

If you want to buy a 64-bit smartphone, then the Apple iPhone 5s is your only choice today. If you want a 64-bit tablet, there are hundreds of options and now, for the first time, the iPad is one of them.

I am long Intel options, long Microsoft options and short Apple options.

Disclosure: I am short AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am long options on INTC and MSFT and short options on AAPL.