Wintel and the Disappearing PC World
Tony is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As discussed in a previous article, the PC industry is facing an uphill battle in the years ahead. The 'Wintel' world is slowly disappearing, being replaced by one dominated by smartphones and tablets. The latest evidence of that can be seen in the latest sales forecast downgrade by a member of 'Wintel' duopoly, semiconductor maker Intel (NASDAQ: INTC).
The company forecast that sales of its microprocessors would be down by about $1 billion in the third quarter of this year to around $13.2 billion. The reason? Increased consumer spending on tablets and smartphones along with a PC industry slowdown ahead of the release of Windows 8 by the other member of Wintel, Microsoft (NASDAQ: MSFT) on October 26. A revision of Intel's forecasts had been expected after Hewlett Packard and Dell warned of slow PC demand last month, but the 8 percent reduction in the revenue outlook was more severe than expected.
Perhaps the most worrying part of Intel's reduced forecast was the fact that PC demand is dropping in the main economic growth areas of the world, the emerging markets. In China, for example, PC shipments fell 4.5 percent in the second quarter of 2012. According to a recent report from the technology research firm Gartner, that was China's first-ever year-on-year decline in PC shipments.
The revenue forecast downgrade from Intel itself and the data from the emerging world should begin to convince even the doubters that the Wintel world is slowly disappearing. Research firm IHS iSuppli predicted last week that the era of Wintel dominance was coming to a close thanks to the rapidly growing tablet and smartphone markets where chips designed by the British firm Arm Holdings PLC ADR (NASDAQ: ARMH) dominate. That is why Intel is attempting to shift some of its business to the production of low-powered chips.
That is also why Microsoft, for the first time, is coming out with a version of Windows that is compatible with Arm-based chips. It sees the writing on the wall perhaps more clearly than Intel does, which was recently talking about a new “golden age” for the company and PCs. Microsoft is worried and rightly so that its Windows operating system will lose its dominant position, thanks to smartphones and tablets, to operating systems from competitors like Google (NASDAQ: GOOG) with Android and Apple (NASDAQ: AAPL) with its iOS.
A forecast from iSuppli shows that Windows share of the PC, tablet and smartphone markets will shrink to 33 percent in 2016 from 44 percent in 2011 and that Intel's share of the same markets will dip from 41 percent in 2011 to only 29 percent in 2016. The obvious winners in this forecast are Google, Apple and Arm Holdings.
So something has to be done by Microsoft and Intel, or they risk becoming less and less relevant in a few years. Microsoft does seem to understand that...thus we see Windows 8, its alliance with Nokia and the introduction of its Surface tablet. It is attempting to adjust to the smartphone and tablet mobile technology world we are moving toward.
Intel is making some moves too, such as its next-generation PC processor code-named Haswell. This chip promises to reduce electricity consumption from 17 watts to 10 watts. Then there's its new Medfiled processor for phones. But to date, it has failed to make much progress in the tablet and smartphone world where chips from Samsung and Qualcomm, based on Arm designs, dominate. It needs to step up the pace of its out the PC world and quickly and quit dreaming about another “golden age” for PCs.
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