Micron, Intel, Microsoft And The Coming PC Refresh

|
Includes: INTC, MSFT, MU
by: Retired Securities Attorney

Summary

Intel will soon be releasing SkyLake.

Microsoft will soon be releasing Windows 10.

Micron is releasing large capacity SSDs.

This is a short article.

As many of you know, I have long positions in Micron (NASDAQ:MU) and Intel (NASDAQ:INTC) and follow them and their industries closely. All of my research starts with primary sources. I use secondary sources as checks. I do research daily, including channel checks.

Something interesting happened yesterday, April 22. Dell listed a 1 TeraByte SSD (1024 GB) as an option for many of its high-end workstations, mobile workstations and desktops. I checked the four other largest OEMs in the PC market, and none of them offer an SSD storage option higher than 512 GB. The five largest OEMs in the PC market accounted for a combined total of 65.3% of the market, roughly two-thirds of it.

OEM PC Market Shares 2014

Dell's 1024 GB SSD is not cheap. On its Precision M3800 Mobile Workstation, it costs $1,050 more than the lowest cost storage option, a 500 GB 7200 rpm HDD, which is good enough for most casual users.

Here are the choices:

Dell Storage Options

But casual users don't buy mobile workstations any way. Power users do. It is still a lot. But wait, there's a 35% discount available. Now it only costs $682.

Is that disruptive? To answer that question, we have to look at a comparison of storage at sizes more normal for most power users. 256 GB is large enough, I think, as a main storage facility with online and offline backups available at little cost. A 256 GB SSD from Dell costs about $205 more than the 500 GB HDD option. A 512 GB SSD, to make it more apples-to-apples, is $487 more. If one or the other is not cost-disruptive, it's sure close.

As of today, no major OEM other than Dell offers a 1 TeraByte SSD for the desktop or in a mobile PC.

OK, that's all nice advertising for Dell, but what does it mean to us as investors?

First, I think it is safe to assume that the 1024 GB SSD is a product of the Intel/Micron joint venture. My sources (untested reliability) tell me that it is planar. Dell refused to confirm or deny that but I believe it.

OK, that's the end of the fact-based part of this article. The rest is almost all my opinion. Those of you who do not think much of that can stop reading now.

So why would Dell offer this option? I don't believe that Dell thinks it will sell enough 1TeraByte SSD drive options in workstations to make it worth offering. I believe that Dell is testing the waters. Testing the waters for what?

For the big PC refresh cycle that's scheduled to begin soon.

Sometime in the near future, Intel's Skylake will be shipping. Skylake is a "tock" in Intel's tick-tock process improvement cycle. That means it puts a new architecture on an existing node. No shrinking is involved.

Sometime in the near future, Microsoft (NASDAQ:MSFT) will be shipping Windows 10. Windows 10 is the touch screen enabled next generation Windows operating system. Windows 10 contains a new browser codenamed Spartan and integrates Cortana. I have the preview on one of my computers and it works fine. Nothing earth shattering though so far. My sources tell me that Morphcore is not implemented in Skylake. Spartan can do some cute tricks, like letting you write on a webpage and save or send it to someone. So?

Sometime in the near future, Micron will be offering what Intel calls (but Micron only reluctantly calls) SSDs with cost-disruptive pricing. Intel's 360GB 2.5" Serial-ATA SSD comes closest but is not quite there yet.

Sometime in the near future, OEMs will be offering cameras with realsense technology. Computers equipped with realsense technology can use face or fingerprint recognition as a log-on instead of a password and recognize gestures. That's a real advantage for a 71-year-old dude - I can never remember my password but I always bring my face with me.

When most of these future events happen, I believe we will have another PC refresh cycle. At these prices, I will want new computers and, I believe, most power users also will.

So when is this future event going to happen? Well, no one can know that yet.

But, Mousie, thou art no thy lane (you aren't alone)
In proving foresight may be vain:
The best laid schemes o' mice an' men
Gang aft a-gley, (often go awry)
An' lea'e us nought but grief an' pain,
For promised joy.

To a Mouse, Robert Burns, 1786.

But when is it supposed to happen?

My sources, some pretty good ones, tell me Windows 10 and Skylake are scheduled for release in July. One source says the third week of July. Some of my sources, also some other pretty good ones, tell me October. Whenever it happens, what will the "it" be?

I believe it will be the release of a huge amount of pent-up demand for PCs. It was building prior to August 2012 and just waiting for the new Windows to emerge. We all know what happened to that demand. Windows 8 did. I'll keep my Windows 7, thank you very much. It kept building and waiting for the fix and that turned out to be Windows 8.1.

Here we are now three years later. Many bought new computers and downgraded to Windows 7. Many others decided to keep Windows 7 and just wait for an upgrade which made sense.

So now we have Windows 10 and Skylake and RealSense and Cortana and Spartan and fingerprint or face recognition log-on and who knows what other magic tricks.

Who can resist that? Not I.

Step up to the bar and buy your new, fresh off the assembly line, super duper PCs, laptops, two-in-ones, three-in-ones, all with built-in this and that.

A PC pent-up demand release will add a lot to Intel and Micron's bottom line. Probably Microsoft's also but I don't follow it closely.

Disclosure: The author is long MICRON AND INTEL.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.