You know why I own a boatload of Nvidia (NASDAQ:NVDA)? Jen-Hsun Huang. That man, along with the talented management and engineering staff that he has surrounded himself with, has a lot of guts. As SA contributor Rob Tanner so eloquently puts it, Mr. Huang hasn't yet lost a battle. Nvidia is the world leader in HPC accelerators, the leader in discrete gaming GPUs for laptops and desktop PCs, and has the lion's share of the workstation/professional GPU market. And now, with a relentless focus on "Tegra" and the Google (NASDAQ:GOOG) Android platform, Nvidia is taking the fight straight to Intel (NASDAQ:INTC) in the world of general purpose computing.
HP Gets Behind Android Convertibles
Hewlett-Packard (NYSE:HPQ) is, despite a lot of the pessimism surrounding the name, a computing giant. It's still top dog in PC shipments, and with Meg Whitman at the helm, it seems that in its quest to become relevant in the tablet/convertible space, it has embraced both Android and Windows. Interestingly enough, while I believe in my thesis that Windows RT is dead and done, I think that Android-powered convertibles could offer an interesting value proposition as the platform continues to grow.
HP, of course, today announced a new Android convertible called the "Slatebook X2." It's thin, light, and is powered by Nvidia's "Tegra 4" mobile chip. It also sports a nice 1920x1080 screen and sells for a mere $479 - and that's with the keyboard, too.
This sounds pretty good, right? Well, it gets even better when you look at what HP tried to launch as the "higher up" model.
Bigger Screen, Lower Resolution, Higher Price?
At the same time, HP introduced a higher-end model powered by a super low wattage Core i3-3229Y, which is a 13W TDP, 7W SDP (this means 7W max in tablet mode with performance scaled down accordingly). Now, obviously this will be a much faster chip, but there are a couple of problems here:
- This is "Ivy Bridge" not "Haswell," so all of the massive improvements that enable all-day battery life/low standby power are not there (bummer!). The lower "TDP" and "SDP" is nice, but battery life for mobile devices is really determined by the idle power characteristics. While the upcoming "Baytrail" Atom and "Haswell" Core should be quite good here, this product will not really benefit in this way.
- The machine costs $799, while at the same time sporting a lower resolution 1366x768 screen (ack!). I understand that this also comes with a Windows license, twice the RAM, more/faster storage, and a larger screen, but from a "how does it look" standpoint, the cheaper Android edition will probably be more appealing to consumers from an aesthetics/cost perspective.
I'd much rather have a Bay-Trail vs. Core-i3 if it meant I could trade-off the performance and put those cost savings towards a higher-res screen.
The Investment Implications
I think that the design win momentum that Nvidia seems to be having with the "traditional" PC players in the Android tablet/convertible space is actually quite interesting, and it will be worth watching to see how well Nvidia can defend its stronghold against Intel, Qualcomm (NASDAQ:QCOM), and so on. I think that given Nvidia's rallying behind the platform, coupled with the reputation that it is garnering as reliable player in this space, could make it tough for the other players.
But more importantly, it is vital for Intel/Microsoft to start getting out lower cost, higher quality "Atom" based convertibles to the marketplace. Nvidia's Tegra 4 is here while Intel's "Baytrail" won't show up in systems until Q4, which could mean short-term pain for Wintel in trying to capture further tablet market share.
From an investment standpoint, it seems to me that there's some real momentum with Nvidia's strategy in trying to take the low end PC space with Android convertibles, which could lead to unexpected upside amid the pessimism for Nvidia's "Tegra" division. While I do have confidence in the upcoming "Baytrail" Windows 8 convertibles, I do wonder if the timing on these devices is less than ideal, leaving an opening for aggressive chip vendors on Google's Android platform to take share in the broader computing market.
Further, there are the longer-term implications. While I noted in a recent piece that "Atom" based products were unlikely to cannibalize "Core" products as the "Core" chips will go into the better designs, that thesis breaks down if the "Atom" based machines are in some ways better than the mid-range and above "Haswell" Ultrabooks. When customers pay premium, then they need to be getting an all-around premium experience. IT departments in corporate/business settings may still opt for performance over form, but in the consumer space it is vital that lousy screens be a thing of the past on the "Core" based Ultrabooks... and present only on VERY low-end "Atom" products (think emerging market).
So, it seems that the Android threat to Microsoft's ecosystem is starting to become much more real, and Intel will need to run even faster in order to keep supplying the Windows 8 vendors with the best hardware, otherwise Microsoft may more aggressively push Windows RT. But the real star here is Nvidia with its Android convertible strategy, and I think that anybody betting against the "green team" will be in for more little surprises like we saw at Nvidia's most recent earnings release.
Disclosure: I am long NVDA, INTC, QCOM. 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.