Judging Wintel on the eve of a new era

The proliferation of Netbooks and the emergence of Internet-based computing raise myriad questions for Microsoft and Intel-and there are no easy answers on the horizon.

Count on the chattering classes to get it wrong. If I had a nickel for each time some expert or another weighed in over the years with a prediction of doom for Microsoft or Intel, I'd be kicking it in the Bahamas right about now.

There has been no shortage of upstarts, touted at one time or another, as can't-miss candidates to upset the computing world's constellation of forces over the past 30 years. All got bloodied for their trouble.

But have you noticed? As 2009 gets under way, it just seems the new year's outlook for the Wintel duopoly looks more unsettled than I can recall.

And not just because of the lousy economy or the concomitant stock market crash. Every technology company is feeling the pain. At some point, though, it's reasonable to assume that the economy will regain its footing and businesses will return to hiring. What's different this time around is that a rebound is not guaranteed to spell boom times for Microsoft or for Intel.

Intel built its business model around the need for constantly increasing performance. But here's what's new: more people than ever do their computing on the Internet. Up until now, Intel has dismissed concerns that the Atom processor, which powers Netbook devices, will cannibalize full-power notebooks or desktops. But we're still too early into the Netbook phenomenon to know how this is going to play out. Intel may wind up selling tons of Atom chips but the part fetches much lower profit margins than do the company's more full-featured processors. How much processing performance do you really need anyway? What about this checklist? Word processor, instant message client, Web browser. For most of us, that's more than enough. Intel wants the Atom to become a success. I'm not sure it can afford Atom to turn into a smash success.

I'm not sure whether a world populated by ultra-small, low-cost notebook computers is all that great for Microsoft, either. The company won't be able to exact the same licensing fee for a $300 computer that it does for a $1,200 PC. And with more people engaging in Internet-centric computing all the time, there are more free software alternatives.

None of this is to suggest that either Microsoft or Intel are even close to calamity. But they've each got a lot to consider as the year gets under way. The proliferation of Netbooks and the emergence of Internet-based computing raise myriad questions for Microsoft and Intel-and there are no easy answers on the horizon. The great 20th century economist Joseph Schumpeter wrote clairvoyantly about a process he termed creative destruction. I wonder if we're about to see its manifestation.

 

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