Intel and Microsoft: Back From The Dead?

Intel and Microsoft are one of the most dominant alliances to ever grace the business world.  The two companies moved in lock-step throughout the PC / Internet revolution and delivered lofty returns to their shareholders along the way.

The relationship between these companies was simple: Intel provided the hardware and Microsoft provided the software.  As more businesses and consumers began purchasing personal computers, some analysts questioned whether this “Wintel” alliance would ever be stopped.

Around this time, Intel Pentium Processors and Microsoft Windows were driving nearly all of the computing power in the world.  Both companies were clicking on all cylinders and delivering record profits to shareholders, but then the music stopped.

Disruptive companies like Apple and Google started innovating and began encroaching into Microsoft and Intel’s turf.  Failed execution on half-baked products like Windows Vista and the Pentium 4 processor opened up new inroads for competitors.  At this same time, the “Wintel” guys started to take their foot off the gas pedal.  The relationship between Microsoft and Intel started to fray.  Intel blamed Microsoft and Microsoft blamed Intel, but either way the missed opportunities were beginning to pile up.

While Apple and Google were executing and driving a mobile revolution, both Intel and Microsoft were on the sidelines.  ARM Holdings delivered an innovative, low power and high functionality CPU design that powers nearly all smartphones.  Google and Apple threw the cumbersome Windows OS model out and started designing graphical user interfaces that were easy to use.  Intel and Microsoft were not innovating and it was finally catching up to them.

Even to this day, Intel and Microsoft have a somewhat rocky relationship but that could all change very quickly with this announcement.  Intel recently announced a new CPU technology, codename 3D TSV, that doubles battery life and increases performance across the board.  The technology has value in servers, notebooks, and desktops but the power saving features are most useful for mobile CPU’s.

This new technology could be the key catalyst that helps Intel make the push into mobile computing, specifically tablets.  Intel would provide the low-power, x86 CPU and Microsoft would provide the operating system for it to run on.

So, is it time to talk “Wintel” reunion tour?

Cream Reunion in 2005.  Source: NYT.

When you think back to some of the great reunions some that come to mind are Led Zeppelin’s show at the O2 Arena, The Police’s nationwide tour back in 2007, or Cream’s 2005 reunion at the Royal Albert Hall.    A bunch of old grizzled rock-and-roll veterans who are hopping back in the saddle for one more go around.  These reunions provided nostalgia for super fans and captivated audiences across the globe, but they were fleeting and shortlived.

No disrespect to any of these bands, but I think the biggest blockbuster could be a Microsoft / Intel reunion.  Tablets are hot right now and Intel / Microsoft have the raw materials to launch a serious comeback in this sector. Intel finally has the hardware to deliver a compelling Windows tablet and Microsoft is gradually improving their mobile products.

Of course there are always hang-ups when you consider these types of reunions.  A poorly implemented tablet OS from Microsoft or an underpowered CPU from Intel could turn this reunion tour into a Guns and Roses “Chinese Democracy” style flame-out.

A legit Wintel reunion, however, could be a long and prosperous relationship that delivers cold hard cash to savvy investors.  I will be following this action closely, but I’m not ready to buy my concert T just yet…

 


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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