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Intel Needs a Google Nexus Win

Ashraf Eassa
November 4, 2013

Many Intel (NASDAQ: INTC) investors have been fixated on potential Apple deals. We've heard about rumored deals in which Intel would manufacture Apple's iPhone chips in exchange for Apple using an iPad chip designed and built by Intel. We've heard about Intel potentially building all of Apple's A-series chips. While these are interesting, they're also exceedingly unlikely; Intel doesn't want to enable a competitor, and Apple's design teams are already world-class. That being said, what Intel bulls should be looking for is a meaningful presence in 2014's Google (NASDAQ: GOOG) Nexus tablet and smartphone lineup.

Microsoft is no friend of Intel's
When Intel's long-term software ecosystem partner Microsoft (NASDAQ: MSFT) -- famously together called the "Wintel" monopoly -- announced that it was building a version of its Windows 8 operating system, it seemed that the Redmond software giant had lost faith in Intel's ability to develop suitable low-power processors for tablets based on Microsoft's future tablet-oriented operating system. Of course, with the launch of the Atom Z2760 -- a chip that was largely considered faster than the Tegra 3 that Microsoft chose for its Surface RT tablet -- it seemed that this hedge had run its course and that future Microsoft tablets would run a full Intel Atom chip.

That's not how it happened. Despite the successful launch of Intel's Atom Z3000 series, which offers best-in-class CPU and graphics performance, Microsoft chose to forsake Intel in its Surface 2 hybrid tablet/notebook. Instead, it chose the NVIDIA (NASDAQ: NVDA) Tegra 4. While all the rest of Microsoft's OEM partners have chosen to use Intel parts, it's clear that Microsoft is no friend of Intel's.

What about Google?
(NASDAQ: GOOG) and, to some extent, its Chrome OS, are the hottest platforms on the block today. Odds are if somebody's buying a smartphone, it runs Android. And, looking at the best-seller lists, people love buying low-cost Chrome OS devices. Unfortunately for Intel, the vast majority of Android phones today come from Samsung. These devices run Samsung silicon or Qualcomm's (NASDAQ: QCOM) highly integrated Snapdragon processors. Given that Qualcomm is a Samsung foundry partner, it's no surprise that Samsung is OK with letting Qualcomm's more suitable chips find their way into devices such as the Galaxy Note 3 and Galaxy S IV.

But, there's hope for Intel. Google also supplies a very popular line of devices under the Nexus brand. These are typically well-designed devices that run stock Android -- no fancy user interfaces and built-in applications -- and sell essentially at cost. Today, Qualcomm, once again due to its superior silicon, holds all of the Nexus slots except the very old Nexus 10 tablet. But this is one set of devices that Intel can actually win if it provides leadership silicon.

When will leadership silicon arrive?
In tablets today, Intel has a sort of "half-winner" with its Z3000 chips. These are great on power, have best-in-class CPU performance, but hav