Intel is getting beaten
The problem comes from Intel Corporation (NASDAQ:INTC)’s unwillingness, or slowness, to adopt product strategies that can sustain the company’s growth. Intel Corporation (NASDAQ:INTC) missed out on mobile computing to QUALCOMM, Inc. (NASDAQ:QCOM), and with Samsung and Apple Inc. (NASDAQ:AAPL) developing processors in-house, the competitive environment has become increasingly difficult.
Intel Corporation (NASDAQ:INTC) has no edge in wireless technologies like QUALCOMM, Inc. (NASDAQ:QCOM), as Intel is reliant on flash-memory and processing technologies for its growth. Intel’s presence in the data center space is one of the last areas where it can anticipate reasonable growth. AT&T Inc. (NYSE:T) believes that the cloud (which relies on Intel Corporation (NASDAQ:INTC) processor-based data-centers) will be a $210 billion industry by 2016.
Information is increasingly becoming centralized in data-centers that can be accessed through the internet through any wireless device. While the cloud provides standardization across all operating systems (Linux, iOS, and Windows), it does not necessarily replace the importance of the desktop computer.
The cloud isn’t that big of a deal
International Business Machines Corp. (NYSE:IBM) reported 70% year-over-year revenue growth from its cloud division. International Business Machines Corp. (NYSE:IBM) has been struggling in the systems and technology division. Companies are adopting the philosophy of renting data centers rather than buying them. This puts a strain on International Business Machines Corp. (NYSE:IBM)’s hardware sales, which declined 16% year-over-year.
The decline in the systems and technology division is likely to continue due to cloud computing. With faster internet speeds in the immediate future, cloud adoption will increase. The cloud has harmed International Business Machines Corp. (NYSE:IBM)’s business, but over the long run, IBM should eventually readjust to the changing technological landscape. The future is about the cloud, but how it affects different technology companies is debatable.
Some are speculating that the computer will no longer be a useful device as all processing and storage functions will be dependent on the cloud. I find that reasoning somewhat fallacious as cloud computing is a solution aimed at improving product standardization (why I use Spotify instead of iTunes).
With Spotify, I gain access to a music library that works on my Windows desktop, Android-based Galaxy S3, and the Apple Inc. (NASDAQ:AAPL) iPad. So there we go; I explained the success of Spotify and the Cloud. Standardization is the reason for the widespread build-out of web based applications. This will result in computing devices becoming far more standardized; it is not a desktop/phone/laptop/tablet replacement.
International Business Machines Corp. (NYSE:IBM) will see further growth in its cloud division as this trend in product standardization continues. It’s not IBM versus Apple Inc. (NASDAQ:AAPL), Samsung, and Microsoft. The cloud and traditional computing work hand in hand, neither is replacing the other. If anything, competition will become fiercer among hardware makers.
Computing cycles slowing down
The problem comes from trying to improve the computer. Consumers have had increasing difficulty with justifying a computer upgrade. Think of it this way, what will a faster processor do for a customer, outside of the added perk of improved graphics in your latest World of Warcraft, Call of Duty production created by Activision Blizzard, Inc. (NASDAQ:ATVI).
High-end gaming isn’t very important to many of the higher-income-earning households. In fact, higher-income households find very little marginal benefit in added computing power. Moreover, wealthier households don’t spend cash on the latest video-game, because a household which earns a higher income tends to spend more on real-world entertainment.
The entertainment of “richer households” involves longer vacations (Priceline.com Inc (NASDAQ:PCLN) anybody?), tickets to the super bowl, UFC championship bouts, and etc. Video games won’t become the primary source of entertainment, so there will never be a sudden influx of computer gamers that will drive up the demand for higher end computing in any substantial way.
Mobile computing is not a complete replacement to laptops or desktops
In fact, most people would never consider creating content on a mobile device, besides taking basic pictures, and posting them on Instagram (nice job Facebook Inc (NASDAQ:FB)). Smartphones are generally geared towards social interaction rather than content creation. In fact, mobile devices are used to share content that has already been created. No one, would ever work on an excel spreadsheet using the latest iPhone, (I’d probably smash my head into the wall if I attempted it).
No, I would never write a post for the Motley Fool with a Research In Motion Ltd (NASDAQ:BBRY) either (just because it has a QWERTY keyboard doesn’t mean I’m sold on the idea of working on a 4” device that would land me a whopping 50 words-per-minute at most). But, maybe if I got really good at typing on a BlackBerry device, I could hit up to 70 words per minute. Yeah, that still isn’t a desktop replacement though.
But, I will attempt to write a Motley Fool post on my Google Inc (NASDAQ:GOOG) Android device, just to see if I can pull it off, and probably pin it to my wall of accomplishments. But, in the end, mobile devices are not a replacement to a desktop or a laptop computer.
Apple Inc. (NASDAQ:AAPL)’s market position is well-established. When smartphones came out, we were made to believe that they can do anything! What we soon realized is that smartphones are really good at some things and really bad at other things. We find the immersive computer experience extremely useful when finding directions, listening to music, and chatting with friends.
Almost every type of chatting program that can be created has been created. We have alternate video talking software (Skype), picture talking (Snapchat), picture making (Instagram), short message bursting (twitter), social networking (Facebook), group making (Google +) etc. The whole point is that we’re running out of innovation, and the mobile phone isn’t moving into the workforce with as much success as we had though it would.
Smartphone devices aren’t going to replace the computing needs of a hospital, I doubt a KPMG associate will be busting out spreadsheets from an iPhone, and I highly doubt a Goldman Sachs associate will be writing the next research report on an iPhone.
Both the desktop computer and smartphone are stagnating. Apple Inc. (NASDAQ:AAPL), in its most recent quarter, was able to report 7% volume growth in iPhones. While that growth will be further supported with product refresh cycles. It doesn’t change the fact that the smartphone, in general, is just another device that connects to the cloud.
Here’s the end game, cloud-computing is already a mature industry (whatever moniker we want to attach next to it is irrelevant), and it’s not revolutionary. It’s just a different way to store data and access files. Online programs have existed for ages, and application stores improve the speed by which we can access them.
New ideas drive smartphone and desktop sales. For now, standardizing the differences between all the different operating systems and form factors is the “new revolution in technology,” after standardizing technology through the cloud; we have to look for the “next big thing.”
The next big thing may just be the desktop. Sort of like fashion, what goes in and out of style, comes back in style.
The article The Next, Next, Next Revolution! originally appeared on Fool.com.
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