Jobs, Gates, and the End of the Wintel Monopoly

LONDON -- Change can take different forms. You can have slow, gradual, evolutionary change. Or you can have change that is dramatic and earth-shattering. The latter is what Joseph Schumpeter called "creative destruction."

Remember those pioneer days?
In the pioneer days of personal computing, around about the end of the 1980s and the beginning of the 1990s, Microsoft (Nasdaq: MSFT  ) and Intel (Nasdaq: INTC  ) started to work together. Intel provided the processors that powered the leading computers of the day, and Bill Gates and his Microsoft programrs designed the software to run on these computers.

Do you remember those pioneer days? I fondly recall my BBC Micro, and my friends had Spectrums and Commodore Amigas; we played games like Manic Miner and Elite -- those were the days!

At that time, Microsoft and Intel were just two among a myriad of emerging companies. Yet, through world-leading technology and, most importantly, strategic nous, these companies began to emerge as winners.

If you were lucky enough to have bought into these two businesses in the early 1990s, you would have made a fortune by now.

The Wintel empire
Eventually, the alliance between these two companies grew so strong and so formidable that it became known as the "Wintel" monopoly. And it really was a monopoly, as Intel-powered computers, with Microsoft software, have dominated computing for the past 20 years.

The alliance grew so powerful that, at one point, there were fears that it might abuse its position, and both the U.S. and the EU felt it necessary to take legal action to control its dominance.

During these years, we had slow, gradual change. There was Windows 95, Windows 2000, XP, Vista, and so on. There were Pentiums, then dual-core, then quad-core processors. You began to think the Wintel empire would last forever and ever.

The world according to Jobs
But not according to a certain Steve Jobs.

A lot of people think they can change the world. A lot of people try to change the world. But Steve really did change the world.

If a company, or two companies, is dominating the marketplace, how can you outflank them? It's quite easy really -- just, as they say, think different.

If Wintel rules the world of mice, pointers, and windows, then just invent another world -- that of touchscreens, gestures, and apps. If Wintel holds sway over the world of heavy, clunky desktops and laptops, invent a new world of light, portable smartphones and tablets.

The spell is broken
Apple
(Nasdaq: AAPL  ) did just that, producing the iPod, the iPhone, and the iPad, in quick succession. Suddenly, the Wintel spell had been broken. Now smartphones and tablets outsell PCs. Light, energy-efficient ARM-powered chips are replacing power-hungry Intel designs. Suddenly, Microsoft and Intel have turned from pioneers to dinosaurs. Welcome to creative destruction, Wintel.

Microsoft and Intel are now playing a desperate game of catch-up, within which Microsoft's recent launch of Windows 8 and Windows Phone 8 is a key move. But they are in a difficult position: Windows 8 feels to me to be an operating system with a split personality -- is it for touchscreens, or is it for mice and pointers?

Behind the curve
It will be very interesting to see if Windows can make the leap from the traditional desktop to touch, but they have a lot of hard work ahead of them, as they are already behind the curve.

It looks like this is just the beginning of an enduring trend that will favor companies like Apple, Samsung, ARM, and Google, and could lead to the gradual decline of Microsoft and Intel. Or can Wintel prove me wrong? The world of tech has a fascinating few years ahead of it.

Tech is a sector that can make, but also lose, a fortune for you. Its volatility, and its susceptibility to change and creative destruction, means that investors should proceed with care. Three sectors which our Motley Fool experts feel are better suited to investors are summarized in this free report, "Top Sectors for 2012."

Prabhat Sakya does not own shares in any of the companies mentioned. The Motley Fool owns shares of Microsoft, Apple, Intel, and Google. Motley Fool newsletter services have recommended buying shares of Intel, Apple, and Google. Motley Fool newsletter services have recommended writing puts on Intel. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a synthetic covered call position in Microsoft. The Motley Fool has a disclosure policy.
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Read/Post Comments (6) | Recommend This Article (1)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 27, 2012, at 10:09 AM, xwallster wrote:

    Job's explicit decision to focus on consumer rather than enterprise helped Apple focus and execute. Meanwhile, the Wintel duopoly was coming apart at the seams. See http://lminfernaloptimist.blogspot.com/2012/06/scratching-su... for my take on this.

    Now, the stronger enterprise survivors (IBM and. surprisingly to some, Oracle) are

    asserting their strengths at Dell and HP's expense, and Apple is walking around the battlefield shooting the wounded with IOS devices.

  • Report this Comment On November 27, 2012, at 10:12 AM, Kafue wrote:

    As Mark Twain once said:

    "The reports of my death have been greatly exaggerated."

    Although tablets and smart phones are popular, the PC is far from dead and INTC is not grinding to a halt.

  • Report this Comment On November 27, 2012, at 5:05 PM, GregKS wrote:

    Lenovo G580 15.6” laptop $387.99

    Apple MapBook Pro Winter 2011 13” $1,225.00

    Current amount of Apple purchasers 6.25%

    Price premium for Apple purchase 68.33%

    Donning flame suit because of all of the Apple lovers out there, but isn't the death of Wintel a little oversold

    Ratio from wired.com

    Prices from shopper.com

    Greg

  • Report this Comment On November 28, 2012, at 12:31 AM, iphonerulez wrote:

    The Wintards still believe the Wintel PC hegemony is as strong as it ever was and will soon make a huge comeback riding on the back of Windows 8. They just can't see how consumers are tiring of using Windows OS and they want something a lot simpler to get them through their day. A tablet is far easier to use and maintain and does 90% of the things the average computer user needs. Why have some overbearing OS running on some big desktop wasting a whole lot of electricity when a thin slab will do the trick. Touch is a lot simpler than needing to use a mouse.

    Windows isn't going to go away for a long time. It will slowly fade as less and less consumers bother with it. There's nothing to cry about. Everything gets replaced eventually. Windows is a fine, fully-featured OS, but not everyone needs the complexity.

    Some commenter is whining about cost. Not everyone is living on the poverty level and can't afford an expensive computing device. Not everyone buys things just because they're cheap in price.

  • Report this Comment On November 28, 2012, at 2:03 PM, GregKS wrote:

    Flame suit working fine.

    ip,

    Who is whining, I was making a point. An Apple is a computer, it is a personal computer, it is a PC. It computes. It just uses a different operating system than a Windows machine. It costs over 3 times what a Windows computer costs. Not having any experience with an Apple computer, I don't know how well it works, but I would suspect that my photo programs, spreadsheets, databases, and word processing programs work just as well on my HP as they would on an Apple.

    Apple is currently using the IBM business model from the 80's and 90's of proprietary hardware and software. It did not go well for IBM in the PC arena, but they changed their model, and last I checked, they were doing just fine. Hope the same thing can be said for Apple in 20 years.

    Greg

  • Report this Comment On November 28, 2012, at 3:15 PM, achillez wrote:

    The media continues to harp on inaccurate data points when comparing Intel to ARM. This article is just relaying what is in the press. Some examples:

    1) Light, energy-efficient ARM-powered chips are replacing power-hungry Intel designs. Suddenly, Microsoft and Intel have turned from pioneers to dinosaurs. Welcome to creative destruction, Wintel.

    Not entirely correct: ARM processors are lower power, and lower performance. When ARM is brought up to the same perf profile as Intel the processors consume the same, or more power then equivalent Intel processors. The recent Intel phone and tablets are perfect examples of that.

    2) It will be very interesting to see if Windows can make the leap from the traditional desktop to touch, but they have a lot of hard work ahead of them, as they are already behind the curve.

    Agree MSFT has been behind, but disagree there is a "lot of work". Apple products have only been out for a couple years. The industry can turn on a coin in less than that. MSFT's Xbox + Phone + PC + Tablet Win8 strategy seems like it could be a winner.

    My last point is did you write this article on your iphone, or ipad or a "PC"? When you answer this Q you'll also answer whether PCs are going away any time soon.

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