One point that seems clear about 2012 is that it marks the definitive end of the "Wintel" era.
The "Wintel" era was marked by a symbiotic monopoly on technology enjoyed by Microsoft (MSFT) in operating system software and Intel (INTC) in PC hardware. Intel chips powered Windows computers, and new versions of Windows were often designed around using the extra speed created by each new generation of chips.
I need new hardware to run my software. Then comes the new software, and the cycle starts over again.
This era is definitely over. Microsoft looks vulnerable as its earnings are valued nearly as highly as those of Apple, while it is preparing the risky move of Windows 8 for the market. Its stock chart this year mirrors that of the U.S. economy generally, a move up early followed by a long sideways track. Intel, meanwhile, should be seen mainly as a dividend stock, with a yield nearing 4%, and a PE under 10. From here the next move for Intel looks to be a downward one.
The Wintel era is being replaced by what I might call the "Sapple" era, for lack of a better name. Despite their court battles, Apple (AAPL) is devoted to Samsung (SSNLF.PK) as a hardware supplier. (For more on that, consider Daniel James' excellent piece from Tuesday.) Samsung's work for Android, in turn, pushes Apple from the bottom of the market to do more on the top end. Wash, rinse, repeat.
But this was not a case of being blindsided. Looking back, I know both Microsoft and Intel saw their time ending at some point. Both companies spent billions of dollars on thought experiments and market trials that went far beyond what they were doing at the time. Both companies saw their weaknesses clearly, but neither had the power to do much when those weaknesses were exposed.
Size had a big influence on that. When you're scaled to a particular opportunity you become devoted to that way of doing business. You can do experiments in a "skunk works" setting, like Microsoft's work on interfaces or Intel's moves into the "Internet of Things." But you don't change how you do business until you absolutely have to, because it's profitable.
What's clear now is that both Intel and Microsoft have to change:
Intel chip inventories are now at multi-year highs. A few years ago this news might have depressed the whole market. Now it seems to mainly reflect problems at Intel itself, and its failure to crack a device market that demands custom chip designs built around their products, and won't design products around Intel chips.
Apple's press conference yesterday began with a long soliloquy of just how much it's beating Microsoft's butt right now. The iMac is now the leading PC nameplate, with 27% market share, and Apple absolutely owns the markets of the future, with Microsoft no longer in the rear-view mirror. Windows 8 has gone from being a risk with a high potential reward to one with a high potential risk.
There is a lesson here for Apple investors, of course. When the "next big thing" happens, they could be just as vulnerable as Intel and Microsoft look now. That may be why, despite its enormous success, Apple still trades at a PE under 16. Pride in success is inevitable, and pride goeth before a fall.