(INTC) produced another eye-popping quarterly result Tuesday, as PC demand rebounded and its huge investments in manufacturing paid off with higher margins. The Intel bulls are numerous -- 37 Buys to 2 Sells (12 Holds). However, one thing caught my attention: Atom “down a bit more than what we normally see as seasonal.” Atom is Intel’s entry into the high-mobility, long-battery-life segment of the computing business (netbooks, smartbooks, mobile Internet devices).
Perhaps this was just an aberration, but I think it’s a sign of a very serious threat that Intel must face: The resurrection of RISC (Reduced Instruction Set Computer) and a new computing platform based on smartphone components. (I call the category “Massively Mobile Computing," with emphasis on "always connected.")
RISC designs have been around for 30 years, and were popularized by the Unix workstation/minicomputer wave of the 1980s and 1990s. Sun Microsystems
(HPQ) and IBM
(IBM) all had/have large server businesses based on their proprietary version of RISC/Unix. Intel (and its x86 designed processors) repelled that incursion, and with the subsequent introduction of Linux on x86 (Red Hat
(RHT)), the RISC/Unix business has declined dramatically this decade. That battle was won by the lower cost and greater application availability of x86.
However, this time around that battle may prove much harder to win as the cost/application equation is shifting toward this new RISC-based platform. (Should we call it UniARM?! -- Unix + ARM Holdings
(ARMH) = UniARM.)
Today the smartphone platform is optimized for long battery life, high mobility, and ease of use. In addition, developers are writing new kinds of applications designed to work with “cloud”-based applications. They're user-friendly (often touch-oriented), thin programs, and given the always-connected nature of the new platform, very rich in content.
The most powerful of these platforms use (i) a RISC-based processor design from ARM Holdings, (ii) a Unix-based operating system (think Apple
(AAPL), Linux, Google Android
(GOOG)), and (iii) utilize solid-state memory (instead of a mechanical hard drive) for storage.
For example, Apple’s iPad runs on its iPhone platform, not its MacBook platform. There are good reasons for this: high performance, low cost, and low power consumption. If you've tried the iPad, regardless of your perception of its utility, you walk away with the thought that “this thing is fast."
I believe the next round of ultra-light notebooks and netbooks will be based on this same platform. It’s certainly not a stretch to see a future version of the MacBook Air on UniARM. Moreover, there's no reason to think that full-size notebooks won't be next. The big question is: Will Intel be able to produce a line of low-power, high-performance processors at a price that can compete with the very, very low licensing costs offered by ARM? And will anyone care to put an x86 processor, regardless of price, in these new devices? This has implications for the enterprise-software business, and this platform will require new management tools, new security systems, and new deployment techniques. It’s at the heart of “cloud” computing, virtualization, and distributed management.Buzz & Banter: Trading ideas & insights from 30 professional traders. 14 day FREE trial.
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