It's clear that Microsoft (NASDAQ: MSFT ) isn't the biggest fan of Intel (NASDAQ: INTC ) these days -- at least if its choice of an ARM (NASDAQ: ARMH ) -based NVIDIA (NASDAQ: NVDA ) Tegra 4 for its Surface 2 tablet is any indicator. While Microsoft continues to push Windows RT, which is essentially Windows 8.1 without the ability to run traditional desktop applications, the company is about to face a big marketing problem. How is it going to sell 32-bit ARM tablets when Intel and its OEM partners will be trumpeting 64-bit tablets like there's no tomorrow?
Marketing makes all the difference
Intel's Z3000 series Atoms, known as Bay Trail, are 64-bit capable today. There is a performance boost in the move from 32-bit to 64-bit for both Intel an ARM-compatible processors. But it's perhaps on the order of only 5-10%, and the difference is hardly attributed to the actual "bitness." However, in a world where Apple (NASDAQ: AAPL ) has already paraded 64-bit chips as a major advantage, the OEMs -- particularly those at the higher end of the Android/Windows tablet space -- aren't going to want to fall behind that. If they can get competitive 64-bit silicon for their designs at a good price, they'll start lining up to take it.
Windows RT will be the only platform without a 64-bit version next year
Apple's iOS 7 is 64-bit capable, and there are tens of millions of 64-bit capable iOS devices for sale today. Windows 8.1 is 64-bit capable, and Android will be 64-bit capable next year (on Intel hardware of course -- 64-bit ARM hardware will likely be available in 2015). It's going to be a really tough for the upcoming Surface 3, which will presumably run Windows RT, to hang in there with the swarm of both Windows and Android competition.
Should Microsoft simply fold its Windows RT strategy and go all-in with a full Windows 8.1 tablet running Intel's 14-nanometer Cherry Trail chips? Quite frankly, Intel's current Bay Trail chips have made many Windows tablet users very happy, and things will get substantially better with the next-generation Cherry Trail. All of this, of course, comes with full Windows 8.1 compatibility and, by next year, enough performance to run the vast majority of PC games. How can Microsoft really pass up on this opportunity?
Microsoft probably will, anyway
That being said, Microsoft wants to make sure that Intel doesn't monopolize the Windows chip market. While it can be argued that if Microsoft needs to optimize for only a small set of processors, it can save time and money while delivering a more integrated, unified user experience in the same way that Apple does with its own chips. Of course, nobody likes a monopoly, but if Advanced Micro Devices can deliver on its promises with Beema/Mullins, then there will indeed be a credible second source in the Windows tablet world, and then there will be no more need for Windows RT.
That being said, Windows RT is probably here for another generation. NVIDIA has been a good and loyal partner to Microsoft, and Microsoft has been getting rather cozy with Qualcomm over the last couple of years. It's really not clear if these two are legitimately better partners to Microsoft, or if Microsoft simply doesn't like that Intel is making a full-force push on Android. But it is clear that Intel has no friends among the major ecosystem vendors -- just the OEM partners that are likely fearful of Google/Microsoft simply cutting out the middle man with respect to devices.
Foolish bottom line
If Microsoft still sticks with Windows RT/ARM for next year's Surface 3, it will be stuck trying to peddle a 32-bit system against hordes of 64-bit systems. While Microsoft probably isn't ready to give up its ARM hedge, Intel will certainly do its best to produce compelling enough chips to finally get Microsoft to put an end to RT.
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