Intel has been trying to push the ultrabook, which is a super-thin and light laptop, and Haswell should allow for battery life that was unheard of a few years ago. Many people are opting for inexpensive tablets, but for those that do more than simply browse the Internet an ultrabook or hybrid device makes more sense.
While Haswell is aimed at more high-end devices, Intel Corporation (NASDAQ:INTC)’s Atom line of processors is aimed at the tablet market at large. Atom began its life in netbooks, a fast-growing market which almost completely disappeared as tablets became popular. Now Intel is working to make the Atom processor suitable for tablets, and the company had its first big win when Samsung announced that its Galaxy Tab 3 tablet would ship with an Intel Atom processor and Intel’s 4G LTE product.
This is important for two reasons. First, it’s the first big win for an Atom chip in a tablet. Second, Intel finally has an 4G LTE modem to offer with its processors. Qualcomm, the leader in the mobile processor space, also dominates the LTE modem market. Intel needed to offer a complete solution, including a modem, and now it does.
QUALCOMM, Inc. (NASDAQ:QCOM) is sort of like the Intel Corporation (NASDAQ:INTC) of mobile, dominating the space with its ARM-based processors. Qualcomm’s dominance comes with lush margins – in 2012 the company had an operating margin of 32%. Intel only managed 27%.
One advantage that Intel has over QUALCOMM, Inc. (NASDAQ:QCOM) is that only x86-based processors can run the full version of Windows 8. There is Windows RT, the ARM version of Windows, but companies are abandoning that version left and right and Microsoft recently slashed the price of its own Windows RT tablet due to poor demand. Windows-based tablets will likely be dominated by the full Windows 8, and Intel is in prime position to pick up most of that market.
Intel chips can also run Android, and this gives Intel another advantage over Qualcomm. Since the same tablet with an Intel Corporation (NASDAQ:INTC) chip could run both Windows and Android, manufacturers may opt for Intel so that they don’t need to design two separate tablets, one x86 and one ARM. Instead they could design just one tablet and sell two versions, one with Android and one with Windows. If Windows 8 tablets gain popularity then this could be huge for Intel and a big negative for QUALCOMM, Inc. (NASDAQ:QCOM).
A big risk for Qualcomm is that it loses the high-end market to Intel. Margins are the highest for high-end tablets, and given that Intel’s processors are typically more powerful than ARM-based alternatives QUALCOMM, Inc. (NASDAQ:QCOM) could start losing that business. This would seriously reduce margins.
The bottom line
Quarter-to-quarter Intel Corporation (NASDAQ:INTC)’s results don’t mean all that much. It’s the big picture that matters, and it will be a few years until we know if Intel’s strategy will pay off. The PC will not die completely, but the decline will likely continue. Intel’s push into mobile is a slow one, but I think that it will eventually be successful. Qualcomm stands to lose the most, as its huge margins are unlikely to last for long. Intel has the resources to push its chips to be more energy efficient while continuing to be more powerful than ARM-based processors, and eventually this will win the company market share.
The article A Marathon, Not a Sprint for This Tech Giant originally appeared on Fool.com and is written by Timothy Green.
Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Intel Corporation (NASDAQ:INTC). The Motley Fool owns shares of Intel and QUALCOMM, Inc. (NASDAQ:QCOM). Timothy is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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