The latest data point is a report from DisplaySearch that shows the size of the tablet market growing six-fold through 2017, but ARM dominating Intel's x86 architecture the way Windows once dominated the Macintosh. As tablet devices, some with keyboards as peripherals, continue to replace desktops, Intel loses its product lead.
Intel still has time to buy ARM, but the clock on that is ticking. ARM's profit doubled this last quarter to over $180 million even while Intel earnings rose to $3.7 billion. Intel credits its PC sales for the improved results, noting that Atom processor sales dropped 32% from a year ago.
Would you rather lead in desktops or tablets?
Intel has grown accustomed to seeing AMD as its chief competitor, but that competition is frankly over. The new threat comes from fab-less companies such as ARMH, Broadcom (BRCM) and Nvidia (NASDAQ:NVDA), all of which can focus their energies on design and marketing of end-products rather than merely scheduling the production of chips.
Long-term goodwill and success in PC markets has Intel shares up 10% over the last six months, while prices of ARM have declined. But since the middle of 2009 ARM shares have tripled in value while Intel's are up just 15%.
Intel has a huge problem on its hands.
Disclosure: I am long INTC.