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  • 11Aug


    Intel (NASDAQ: INTC), a member of the Dow Index, has gone through a tough time in the market lately. The stock has been beaten down, though there is some relief rally in the last week thanks to an analyst upgrade.

    Are things that bad for the Santa-clara and Chandler, AZ based chip maker? Are the glory days over for this PC chip giant? I feel like I am back to the late 90s since I had seen these questions being asked then with the Intel bears citing a mature PC market.

    Computers are certainly not going away…….. But not so sure about PCs. Is it possible for another appliance to take over the role currently served by the PC? Perhaps the role may be much more diminished and diluted by say, a cell phone or a PDA device for lot of the common things like email and internet surfing. Will they totally supplant the PC?

    The migration of the roles would certainly slow down the growth of the PC market and perhaps rapid advances in the PDA or cell phone technology will definitely make a dent into the PC market share. Newer technology is definitely in the application chips that drive devices through out the home and office, the set top boxes, cell phones, PDAs, black berries, and perhaps a little device on your fridge, and washer and dryer and your oven, and your telephone.

    But you do need a central device that hooks up and communicates with these scattered devices through out your home or the office. It is much easier to surf the web on my PC or laptop than on the TV through my set top box. Even if I want to know about a movie before ordering the PPV, I don’t like the four line description on the TV guide available after several presses of the remote control buttons. Hop on your laptop, google the movie, ……….. there you have it; the rating, the reviews, the cast, the director and every thing that is ever written about the movie.

    So would that central device that connects my Ipod, my set top box, the refrigerator, my calendar, be the PC? Perhaps. If not a Wintel PC, may be something similar? Will that be a small PDA or a blackberry?

    May be this central device is not a windows device, but perhaps a device controlled by Linux or the Apple OS. A device that does not crash often, does not ask you to download updates every working hour of your day…….. Even in such a world, it seems Intel is the natural processor on such a computing device.

    May be Mr. Jobs thinks so. With the new alliance with Intel, Macs and Ibooks are going to be powered by Intel processors. There could be four possible scenarios that could develop. And in reality, it could be a combination of these scenarios that may actually thrive.

    Scenario 1: Microsoft and Intel dominate this space and the central computing device is a Wintel PC…….. Perhaps Microsoft discovers the magic OS that cleans up most of the current ills, and continues to rule the home and the office.

    Scenario 2: The central device is an open source OS controlled computer with an Intel Processor.

    Scenario 3: The central device is an “IHub” from Apple powered by a new MAC OS and a new Intel Processor for the MAC.

    Scenario 4: Oh wait……. it is a Gdevice from google in alliance with Oracle. Just a dumb device with a keyboard and Mouse with access to google online appliances and home gadgets. All your home devices are centrally linked into your Gmail account.

    Of all the above possible scenarios, only scenario 4 smells trouble for the Intel empire. You don’t need powerful processors to run a dumb terminal device………… most of the brain is supplied by google.

    Given Intel has the first mover advantage, its chips have a better than fair-share advantage to dominate the first three scenarios.

    The above scenarios summarize what will happen to the home PC market. However, what fraction of Intel’s PCs are sold to the home market versus the business market? Even if Intel loses its dominance in the home PC market, it has a major presence in the business market and the server market.

    There has to be radical shifts in technology and corporate thinking to move away from windows based workstations into something different. With Dell and other PC makers churning out low cost Wintel PCs, it is hard to think of a substitute with similar computing power.

    So you wonder about the pessimism behind Intel…….. is it priced for the temporary hiccups in processor upgrade releases in its race with AMD? Mostly that and also the halo effect from Microsoft…….. its much awaited but ever delayed new version of Windows.

    However, wall street is waking up to the strong fundamentals of the company with a series of upgrades in the past two months. The opinions state that the fundamentals have some what improved but the selling is somewhat overdone.

    Disclaimer: The above is not an endorsement of Intel or a recommendation to buy INTC.

    Posted by markc @ 4:52 pm

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