This Week in Tablets: Intel, Microsoft, and PC makers face the exact same problem

January 19, 2013

In product design and technology, there are four major release windows: ahead-of-its-time, on-time, just-in-time, and flat-out late.

A number of factors—company size, quality, consumer demand, and corporate overlords to name a few—can amplify or mitigate the effect this timing has on a product’s success and/or legacy.

Microsoft’s first tablet initiative, for example, was too far ahead of its time. And the company’s current Windows 8 tablet initiative—either just in time or late—isn’t exactly surging to the front of the pack.

(This said, it might actually be possible that Windows 8 is actually ahead of its time. Might be possible.)

Rolling Stone on the other hand, is probably playing its hand in on-time fashion in the transition from magazine to tablet.

Hearst Publishing is on-time also.  The publisher recently announced the ground-breaking decision that it will now release its issues to the iPad ”days” before they hit print newsstands.

What a change of fortune tablets have been for the magazine guys. Five years ago, it sure seemed like all was lost for print media.

Apple: Used to be ahead of its time

Apple made a fortune riding the wave of ahead-of-time, even if that wave is starting to crash a little bit. See: all the chatter about next-gen iPhones and what-not.

The tablet ocean is also becoming redder by the day for Apple. Sales figures are showing that the iPad is being outsold in Japan by Google’s Nexus 7, which has a market share of 44% compared to Apple’s 40%. (This may explain why Samsung is rushing forward with an 8-inch iPad destroyer.)

For what it’s worth, the only thing I can think of that would make the iPhone ahead of its time again is some new method of actually talking on the phone. Because it’s still not the greatest or most reliable experience.

And what about PC manufacturers?

PC manufacturers like HP and Dell are in a tough spot because by and large they’re attached at the hip to the Windows and x86 architectures.

The OEMS are also attached to keyboards and desktop displays and business customers who are still buying millions of PCs every month, so it’s hard to argue that they’re in a losing position as tablets by Apple and Google and Samsung penetrate the mainstream. But the standard stock PC manufacturers are in trouble, and will more than likely face a shakeout in the next three years.

For Intel, dire stakes

Intel is in an even tougher position. The chipmaker’s offerings definitely fall into the flat-out late camp. The company is betting on ultra-books as a bridge to a tablet-dominated world. It’s not a bad bet, but how many of these ultra-book manufacturers are going to be around in 5 years?

To its credit, Intel does not seem worried or scared of the future, despite a tough Q4 earnings call this week, in which the company reported revenue down 27% vs. 2011, largely because of a 3.5% year over year decline in PC shipments across the world. The company’s executives have consistently spoken about the changing future, and how they are preparing for it.

Having covered technology intermittently since 1992, I’ve seen Intel confronted with long competitive odds before. The company’s response typically boils down to two plays:

1. Student body right.
2. Student body left

I’m not trying to be coy here. Intel’s strategy is to literally throw as much of its famed engineering and fabrication resources at the problem two years in a row. The first year, it tackles a handful of issues and produces something speedy but typically not very efficient.

The second year it does the same thing, and the end result is a leapfrog processor that is typically better-suited to the task than the first-generation silicon, and many of its competitors.

Meet Haswell and Broadwell

First up will come Haswell. The follow-up to Intel’s Ivy Bridge architecture, this microprocessor architecture will be fabricated on a 22 nanometer process. Experts—including Intel—have speculated that we should see a 10% performance improvement in processing and up to a 100% improvement in graphics processing.

Even at the mobile level, Haswell should produce dual-core and quad-core CPUs. These chips will also have improved thermal design, resulted in improved battery life.

Haswell is a broad platform, built for more than just mobile. But Intel will be producing a mobile-oriented low-power part designed for ultra-books and tablet convertibles. This processor will likely debut this summer and will have a “y” tacked onto the end of model numbers.

We know less about Intel’s next-gen chip architecture—code-named Broadwell—because it’s still more than a year away. But because it will be built a smaller 14nm fabrication than Haswell processors, Broadwell is a major “tock” in Intel’s tick-tock development scheme.

We do know that the processor will likely release in both an ultra-book and a tablet version.

Never too late?

Even if Intel successful at moving into the ultra-mobile computing category that tablets represent, it’s sobering to think that Intel is going to making its first steps into the tablet fray in 2014, a whopping five years after the market started up.

By that point, we’ll be on the 4th, 5th, and—in the case of Apple—6th generation of tablet devices. And out of some 200+ million tablets on the market, only a slim percentage of those devices will utilize Intel chips. 

This said, it’s not like tablet computers will have disappeared by 2020 or will have no need of powerful new processors by that time. So Intel has time to figure this thing out.

This week’s loser: Intel

In the meantime, while Intel prepares for the shift, market conditions are battering its profit margins around. A 3.5% decline in PC shipments in Q4 2012 is not a good sign for PC makers…or Intel.

The silver lining is that at least it appears Intel’s executive suite understands the challenge. In the company’s earnings call, CEO Paul Otellini told reporters and analysts that “it’s no longer necessary to choose between a PC and a tablet”, and that we’re in the midst of a “radical transformation”.

For now, Intel is still squarely in the Windows camp. And also for now, ultra-books—not tablets, and not phones—are the end of the line for its CPUs.

In the meantime, more of the competition is beginning to think about alternate architectures. Just this week, HP CEO Meg Whitman talked about the company pursuing ARM-based servers (not a huge leap given ARM’s RISC roots) as an example of how it is finding ways to innovate during this transition.

This week’s winner: Amazon

Talk about nice business models. This week, ABI Research determined that Amazon only needs to make $3 a month of profit from each of its Kindle Fires to generate an overall profit of 20%.

That’s one book or one app. Left unsaid here is that consumers are probably buying double that.

It also doesn’t include Amazon’s profits from other mobile platforms like iOS, Android, and Windows.

On the horizon: Microsoft

The next few weeks are going to be telling for Microsoft.

First, the company delivers its earnings report this coming week. We’ll likely learn a lot of about the performance of Windows 8 (which seems solid) and, more importantly, Surface.

And then, one or two weeks after that, we’re going to see the first Surface Pro tablet in “coming weeks”. What will the reaction be?

Here’s what I know: If I bought a Surface Pro tablet, one of the very first things I would do is install a third-party add-on like Start8 so that I could regain access to Win7 functions like the Start button.

I made this $5 enhancement on the touchscreen All in One PC in my living room, and I couldn’t be happier.

Finally—and I’ve been waiting all column to say it—I can’t wait to hear more about the Manti Te’o thing. This is one of the weirdest sports scandals I’ve ever seen. My bet? He’s involved in the whole thing. There are just too many oddities in the progression of events to think otherwise.


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