Intel Won't Hate Tablets Forever

By Chad Henage - April 26, 2012 | Tickers: AAPL, ARMH, INTC | 0 Comments

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Fellow fool and tech guy Evan Niu, recently wrote an article about how Intel (NASDAQ: INTC) hates tablets. He did acknowledge that this is probably a temporary situation, and mainly stems from the fact that Intel isn't a player in the tablet market. The theory is, most of the tablets out today run on chips made from processors designed by ARM Holdings (NASDAQ: ARMH). Intel wants to go a different direction at least for now. Intel tried to say that Ultrabooks, as they are known, are the culmination of what users want. While the Apple (NASDAQ: AAPL) iPad is good for consumption of content, “when there is real work to be done, users really like to do it on a laptop.” Let's first look at the standard Ultrabook and compare it to today's tablet king the iPad. Second, let's see if Intel really hates tablets, or if this is just a game to buy time until they get stronger in the tablet space. 

The Ultrabook versus the iPad

I won't pretend to be the expert when it comes to everything that an iPad can do better or worse than a laptop or vice versa. I will say I own both a laptop and an iPad and there are good reasons for both. Let's look at each of Intel's reasons for the Ultrabook versus tablets.

Intel says one of the reasons that Ultrabooks should be appealing to users is “responsiveness”. I don't know anyone in their right mind, who is going to say that an Ultrabook is going to be as responsive as the iPad. The difference isn't in the startup or shut down time, what really matters is how fast the applications load. Applications are less complicated and smaller on the iPad and thus they launch faster. Unless and until the applications on the average Ultrabook get smaller and simpler they can't compete.

The second reason Intel gave for favoring Ultrabooks was, mobility with battery life and connectivity. When it comes to connectivity there isn't a separating factor. Wifi in all its iterations, is in both the iPad and Ultrabooks, and both can be used with multiple networks. When it comes to battery life and mobility, let's dispense with the discussion and compare some numbers, you tell me what you see:

Sorry, but Ultrabooks are not in the same class. With anywhere from 11% to 40% less battery life, and in most cases double the weight, these Ultrabooks can't go head to head with the iPad.

When it comes to aesthetics and solid design (which was Intel's third reason Ultrabooks were better), I won't say that most Ultrabooks don't look good. The difference is, they look better than a regular laptop, but it's not as though the iPad is made of cheap materials either. Since many Ultrabooks are taking a cue from the Macbook Air, they are largely being made of the same aluminum and glass enclosures that the iPad is constructed of.

The last issue of security, I will concede to the Ultrabook camp. The iPad just isn't designed for specific software manipulation. There are apps already developed to try to protect the iPad and its data, but nowhere near the depth of security available on a traditional operating system.

The biggest issue I have with Intel's assertions is that Ultrabooks will offer more choice at “mainstream price points” and deliver better value. That is a tough comment to swallow. Consider that the above Ultrabooks are priced at $800 - $1,000, and even the high end 64 GB iPad with 4G is $829. The “value” that customers would receive has to be in the physical keyboard and the larger hard-drive. Considering that most people don't buy this top price point iPad, the price comparison gets even tougher. While a physical keyboard and larger hard-drive can be important, it ultimately comes back to what the user is going to do with this device. If they are consuming content, Intel has already conceeded the iPad is good at this. Personally, I use my iPad to consume content, and I use my laptop to create content. The iPad can't come close if I need to type a document, or manipulate a spreadsheet, but my laptop is downright terrible when it comes to e-mail and web browsing on my iPad.

Intel Loves Tablets And Phones...Coming Soon

Intel actually is quite fond of tablets and phones, but the company isn't a major player...yet. Let's get real, Intel's ability to enter the tablet market and smartphone market are tied together. Intel's Medfield line of processors turns up over 2 million results on Google search. One of the consistent phones that comes up is, the Intel powered Lava Xolo X900. This is one of the first smartphones that runs on an Intel chip. According to some, it matches the Samsung Galaxy S 2 and Galaxy Nexus for battery life. In addition, though the battery in the phone is smaller, it performs better than the larger battery Droid Razr MAXX. The fact that the chip performs well in CPU tests against ARM chips is a win for Intel as well. A huge differentiating factor for Intel's Atom chips in tablets, is the fact that Intel powered tablets running the upcoming Windows 8, should run legacy software that ran on x86/64 software. ARM powered tablets won't have this capability. So in the battle for long-term dominance, think about this, if you are buying a Windows based tablet, do you want one that can run a few thousand apps? Your other choice is buying a Windows based tablet that can run a few million legacy applications. Users generally don't love having to learn a new system, and being able to use applications on their laptop or their tablet is a big deal.

Conclusion

Intel expects to be a major player in the smartphone market in a few years. The natural connection to this is tablets. Intel is beginning its move into smartphones, and tablets won't be far behind. Intel's R&D budget of about $6.5 billion is fully 3+ times more than ARM Holdings' assets. Intel management is not dumb, they don't actually believe that consumers will adopt Ultrabooks over tablets in droves. What Intel is doing is, trying to get consumers to trade their traditional laptops for Ultrabooks. With many mainstream notebooks selling for $400 - $600, they are being sold with some of Intel's cheapest chips. This hurts Intel's profit margin. If the same consumer can be convinced that Ultrabooks are a better option, Intel's margins improve. Once Intel gets a few major smartphones running on their chips, expect the heavy push by “chipzilla” to begin. Intel has faced threats before, and management is being coy about this one. Trust me, in the end Intel loves whatever the customer is buying, as long as it has Intel inside.

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