The New Year brought out a few analysts predicting that the inability of Microsoft (NASDAQ:MSFT) and Intel (NASDAQ:INTC) to adapt to the mobile computing market will mean the end of Wintel. The end of the Windows/Intel juggernaut will mean the rise of Google (NASDAQ:GOOG) and the ARM architecture.
We’ll call Google/ARM “GARM” for short. GARM refers to Google’s Android operating system and the ARM architecture, which dominates the mobile market. Intel and Microsoft primarily ride with the x86 computing architecture. (WINdows InTEL) Refers to the world’s largest computer environment, which is Windows running on an Intel CPU.
Susquehanna Financial analyst Chris Caso set the scene in a research note:
We believe the convergence of three enablers – Android, ARM and touch – have the potential to end the dominance of Microsoft and Intel in what we now know as the PC market. At the very least, we think the emergence of a Google/ARM duopoly will be highly disruptive. The bottom line is that ARM-based processors are now capable of fulfilling the majority of consumer computing requirements in a cheaper, lighter and more power-efficient package than the current notebook PC. At this point, we believe the genie is leaving the bottle – we think MSFT and INTC can take steps to participate as the market shifts, but we believe the market shift is inevitable. With respect to INTC, we think its superior manufacturing capability and processor expertise will enable it to be a market participant, but the eventual elimination of the “Wintel” entry barrier in the mobile computing market would have negative long-term market share and margin implications.
Click to enlargeCaso’s theory is on target, but the timing is tricky. It’s easy to get convinced to do a Wintel doomed post, but the reality is much more nuanced. For starters, Intel bought Infineon to play better in the mobile market. Microsoft also was reportedly going to show off a version of Windows on the ARM architecture. Mary Jo Foley is highly doubtful of that one.
Even though Intel and Microsoft are dabbling in the ARM market, both companies are too tethered to the x86 architecture to really go crazy. That fact means that Marvell, Qualcomm, Broadcom, Nvidia and others can sneak up on Intel.
The worries about Intel are so evident that Auguste Gus Richard, an analyst at Piper Jaffray, kicked off the year with a downgrade. Richard rates Intel a “neutral” because “Intel is missing the wave in the ultramobile market and is not likely to gain traction in 2011.”
While Intel manufacturing prowess is unparalleled, it is shackled by its x86 legacy in the ultramobile era. Intel has been unable to drive material penetration in the ultramobile market and we expect this will continue in 2011 and likely 2012. We do not expect Intel’s 32nm Medfield platform for smartphones, expected in 1H:11, to gain significant share in 2011 and perhaps 2012. We understand Intel is dropping legacy x86 features in order to lower power consumption in future products, but it is not clear if this is Medfield or the next generation. We think Intel may have to abandon its legacy x86 architecture or significantly improve its (system on a chip) design capability to be competitive. We think the train is leaving the station in the ultramobile era and so far Intel is not on board.
Do you buy the death to Wintel case? If so, what’s the timing?