Great News for Intel

Intel (NASDAQ: INTC  ) bulls have been eagerly anticipating the imminent launch of products built around the company's latest Atom Z3000 Bay Trail system-on-chip family. These are low-power products aimed at everything from svelte 7-inch tablets to larger two-in-one PCs, such as detachable tablet/PC hybrids. While the Atom processors of yesteryear were anything but compelling (after all, when you don't update your chip design for five years, it tends to get a bit stale), the latest parts are fast, cheap, and low-power. While the majority of the tech community and the press have finally come around to the fact that Intel can do low-power chips well, the big question for investors is whether these designs will actually sell.

The ASUS Transformer Book T100 -- an initial data point
A number of Z3000-series Atom-based products have been showcased/announced, including the Dell Venue 8 Pro, the Lenovo Miix 8, and even tablets from Fujitsu, Sony, Toshiba, and Acer. However, one partner -- ASUS -- not only announced a very affordable 10-inch tablet/convertible known as the Transformer Book T100, but it's even available for pre-order on Amazon (NASDAQ: AMZN  ) . While this isn't particularly unusual, what looks to be very encouraging is how well it's selling in pre-order.

Indeed, a look at the best-seller list of notebooks over at Amazon shows that the Transformer Book T100 is already ranked No. 8 .

It could be argued that this isn't necessarily good news for Intel, as it means that this device is merely replacing another Intel-based device, implying that these sales aren't incremental. But there's a counterpoint to that.

The PC space, particularly the lower end of the market, has been getting decimated by tablets for quite some time. Why? Tablets are cheaper, more portable, offer better battery life, and -- with additional accessories -- can be turned into a fairly viable replacement for most consumer notebooks. However, the strategy that Intel, Microsoft (NASDAQ: MSFT  ) , and the bevy of traditional PC OEMs looking to rejuvenate their flailing PC sales is to offer devices that not only offer the same convenience, price, and portability of a tablet, but to also provide value by including a full PC OS and the ability to use the device as a PC when desired. If the initial Transformer T100 pre-orders are any indication, the strategy may yet succeed.

This is just the beginning
This is just the first part of a much broader strategy. By this holiday season, there will be Z3000-based tablets of all shapes, sizes, and colors running the full copy of Windows 8.1. The key to Intel's success here will be in making sure that the OEMs that are building designs based on Intel's chips produce products that are genuinely compelling and come at an excellent price. Last year's Z2000 series chips weren't exactly leaders in the sense that the Z3000 chips are, and yet many of those Z2000-based designs were priced incredibly high. Despite this, Intel managed to grab about 5% of the entire tablet market with that prior design.

From here, investors will witness the launch of 8-inch devices based on these new chips and Windows 8.1, again at even lower price point. The Dell Venue 8 Pro is a gorgeous tablet that comes priced at just $299 for the base model, and the rumor mill suggests that Lenovo's own Miix 8 (another beautiful design) will retail for just $250. Shortly thereafter, these new chips will power Android-based designs, which should significantly expand Intel's total addressable tablet market and drive further share gains.

The Foolish bottom line
While the decline of the traditional PC is still a problem, it's looking clearer that Intel and its partners are simply dealing with a shift in form factor. At the Intel Developer Forum, I had hands-on time with both Atom and higher-end Core-based tablets, and it was evident to me that the future of the PC really is in these convertible/detachable-style devices. While the lower-cost Atom parts will shore up the low end of the PC space and drive incremental volume at even lower price points with small tablets, the higher-end, Core-based tablets will likely keep the high end alive and kicking, which should help make sure that the Atom push is incremental rather than cannibalistic. Of course, time will tell how this all plays out, which is why watching the sales trends during the fourth quarter will be critical in determining whether Intel is finally back on track for growth or not.

 

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  • Report this Comment On October 10, 2013, at 12:02 AM, techy46 wrote:

    The PC's Dead was a boon for the Apple pump and dump at $700 crowd and it's fueled the same enthusiasm for ARMH and QCOM. I think 2014 will be the year that show how Android and Windows can fuel a huge smart phone and tablet surge of commodity devices with Intel Atom and i3-7 Inside.

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