Intel, Microsoft Hurt by Late Response to Tablets: Goldman Sachs
The booming tablet PC market could prove to be an increasingly larger challenge for both Intel and Microsoft, according to an analyst at Goldman Sachs.
In a research note released Dec. 13, Goldman Sachs analyst Bill Shope noted that while the tablet market-reinvigorated by Apple's release earlier this year of the iPad-will continue to grow, much of those sales will be of devices powered by ARM-designed processors and running Google's Android operating system or Apple's iOS. Goldman Sachs expects that 54.7 million tablets will be sold in 2011.
"If this is the case and our tablet forecast is anywhere near accurate, this would be the first time in three decades that a non-Wintel technology has made legitimate inroads into personal computing," Shope wrote.
He said the rapid growth of the tablet space was anticipated. However, what platforms have become popular for tablet makers-and which ones haven't-wasn't expected.
"This rush of iPad competitors is not surprising in itself, as Apple tends to regularly define the direction of the electronic media and computing industries," Shope wrote. "What is surprising is that many of these products are not utilizing Intel microprocessors or a Microsoft operating environment."
Intel and Microsoft are going to need to become larger participants in the tablet space, because the devices promise to eat into PC sales, according to Goldman Sachs. In its report, the firm said tablet sales could erode laptop and netbook sales by a third. Microsoft and its partners have been too slow in responding to the rise of tablets, giving Apple and Google a significant head start.
Officials at both Microsoft and Intel say their companies expect to become significant players in the tablet space. During a call in October to announce the company's third-quarter financial numbers, Intel President and CEO Paul Otellini said Intel will be aggressive in pursuing the market.
"We will use all of the assets at our disposal to win this segment," Otellini said at the time. "We fully expect to participate fully and broadly in this market."
Apple rejuvenated a stagnant market with the launch of the iPad, and now dominates the fast growing space with about 95 percent market share. However, a spate of vendors-from Hewlett-Packard, Dell and Lenovo to Samsung, Cisco Systems and BlackBerry-maker Research In Motion-have rolled out their own tablets or are planning to in the coming year.
Intel already is looking to push its way deeper into the tablet space. At the Intel Developer Forum in September, the chip maker showed off a number of Atom-based tablets that were in the works, and more devices reportedly are being readied for the CES (Consumer Electronics Show) 2011 in January in Las Vegas.
Intel also is gearing up to release two Atom platforms in 2011 aimed at the tablet market-"Oak Trail" for systems running Microsoft's Windows OS and "Moorestown" for devices running Google's Android OS or MeeGo, a Linux-based operating system developed by Intel and Nokia.
At another event earlier this month, Otellini said tablet manufacturers are getting ready to use Atom in 35 different tablet designs. While he spoke, a slide behind him listed a number of those vendors, including Dell, Asus, Lenovo and Toshiba.
To further focus on the market segment, Intel this month created its Netbook and Tablet Group, which will be part of the company's Embedded and Communications Group.
Goldman Sachs analyst Sarah Friar in the report said that it appeared that a "tablet response is still not forthcoming," and noted that earlier this year, Microsoft officials said Windows 7-powered tablets would be on sale by Christmas. Now talk is of early 2011.
Microsoft also has tablet plans for 2011. CEO Steve Ballmer reportedly will introduce a number of Windows 7-based tablets at CES. The New York Times, quoting unnamed sources, said among the vendors introducing Windows 7 tablets will be Dell and Samsung.
Ballmer may also show off a tablet running Microsoft's as-yet-unreleased Windows 8 operating system, according to the Times story.
Some analysts say Microsoft will be able to make inroads into the tablet space, which market research firm iSuppli said will grow from 13.8 million units shipped in 2010 to 63.3 million by 2012.
"Even with Microsoft's stumbles to date in tablets," iSuppli said in a Dec. 14 report, "iSuppli believes that Microsoft will figure out how to design a functional tablet operating system."