Will Microsoft Add Some Definition to the Implications of Intel’s Guidance Announcement for the Broader PC Market?

In the aftermath of Intel’s Guidance announcement of June 21, 2014, thousands of words have been written by what looks like an ever growing list of analysts about what the import of these numbers actually mean, not only for Intel®, but for the overall PC market.

Three themes run through most of the commentary:

  1. The improved demand for PCs is a temporary phenomenon, largely the result of increased sales of PCs to businesses
  2. Business demand can’t be counted to last as the driver is the end of product life for Microsoft® Windows XP
  3. Some of the increase in sales can be found in more interested consumers purchasing “2 in 1” computers, which can be used either as a laptop, or as a tablet

There are some issues with each of these three themes:

The first theme underestimates the importance of improved business appetite for PCs, and includes a prediction about how long this improvement will last. There are few tablet computers on the market today (with the notable exception of Microsoft’s Surface Pro 2 and 3, but more about these later) with attractive street prices above $1,000.00. But there are quite a number of PC options for desktop computers, laptops, and, especially, servers carrying a price about the $1K number. So improved business appetite for comparatively higher priced computers will likely be a good thing, not only for Intel, but for its OEMs, the businesses manufacturing other parts for these computers, and more.

I don’t believe there is enough data, at least as of yet, to produce a reliable prediction as to how long this improvement can go on. No one has factored in the possibility of a change in consumer sentiment about the safety of cloud computing. If one agrees with a notion about consumer appetite for tablets (but this notion can also be applied to smart phones and even home entertainment computers/game consoles) based around the usefulness of these “portable screens” as superior viewers for e-reading, movie watching, games, and television, then cloud SaaS products are going to be more important for this segment of the computing market than would otherwise be the case for PCs. If the present market potential for these devices is approaching saturation, and the threats represented by the never-ending string of successful cloud computing hacks grow more intimidating, then it may be the case the improvement in the PC market may have greater longevity than analysts have planned upon.

As to the 2nd theme, as I wrote in an earlier post to this blog, perhaps a driver is an improved consumer perception of Microsoft’s Windows 8 operating system. Microsoft formally announced the end of life for Windows XP last year, and the actual due date, in April of this year, will soon be a quarter behind us, so I’m not sure migrations to new computers replacing Windows XP is a big driver, any longer.

Finally, and this is a big point, hasn’t Microsoft maintained a very consistent approach to the tablet market, all along, to present the Surface product line as the best method of improving productivity, while, at the same time, supporting consumer needs for great e-readers, movie viewers and portable game consoles? In sum, isn’t the Surface tablet a great example of one of these “2 in 1” computers? But with the name tablet?

Since the Surface Pro 3 announcement last month, which included a video presentation about how some customers have been using the Surface tablet to enhance productivity, the New York Times web site has featured what looks to be a daily ad from Apple presenting precisely the same type of information about some prominent consumers of iPads. Is it safe to assume, then, some traction for Microsoft’s tablets as examples of these “2 in 1” computers. If this assumption is reliable, then doesn’t the argument end up in the circular file? After all, the Surface is a tablet and not, per se, a PC.

Ultimately, when Microsoft either next reports earnings, or, potentially, announces a change in its own guidance (and I have absolutely no indication whatsoever of its plan to do so), we should get some more useful color on this point, right?

Disclaimer: I’m long Microsoft and Intel. I am not invested in Apple. Neither am I invested in the New York Times

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

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