What If Microsoft And Intel Weren't Two Years Late?

Intel this week rearranged the deck chairs on the Titanic known as its mobile devices groups. What used to be four separate divisions within Intel--netbooks and tablets, ultra mobility, mobile communications, and mobile wireless--now will be combined into one group, which will be called the mobile and communications unit. The news comes on the heels of the earnings warning from the company, and was preceded by a similar move from Microsoft that saw Windows Phone division chief Andy Lees relieved of day-to-day responsibility of that product line.

There can be little doubt that both Microsoft and Intel were caught flatfooted by the boom in smartphones and tablets, but one has to wonder whether there's more to it than simply being two years late to the party. Particularly in Intel's case, the move seems a sensible one that was made years too late. By simply creating intellectual property and licensing it, ARM had essentially done years ago what Intel is doing now. By licensing its processor to Nvidia, TI, Qualcomm, Apple, Samsung, and others, it's allowed those companies to create systems on chip (SOCs) that played to their strengths and led to great parts for innovative phones and tablets. Meanwhile, one can just imagine the inter-division friction that's gotten Intel so late to this game and continues to slow the company down in unnecessary ways. The only real question is why it took Intel top management this long to get their internal structure aligned to the single focus of creating great phone and tablet guts.

The upshot is that for both companies, missing the wave is a very big part of why Atom and Win Phone/Mobile are relegated to single-digit market shares. But I also wonder how much better these companies would have done if they had been on top of their game. In Microsoft's case, there is, of course, the matter of Redmond wanting its slice of each phone that runs its OS. Under healthy competition (where, say, Apple's, Google's, and Microsoft's operating systems all are viewed in the same light and all have similar phone and app ecosystems), Google would probably have a slight advantage with its licensing policy, probably to the tune of about $50 per phone. But as it stands, Microsoft just wants market share so you can bet at this point it's more about subsidizing than it is about extracting licensing fees.

For Intel, even if it had seen the wave coming, it wasn't in the phone business and others were. So by ARM licensing its intellectual property, it had a smoother path into this market than Intel would have had under any circumstance. The licensing model also allows for a lot more innovation at the SOC level. Intel makes lots (and lots and lots) of variations of its chips, but Nvidia has its expertise, and Qualcomm has its. Through the licensing process phone makers get a lot of choice--inevitably more than they would have gotten from one dominant manufacturer.

At the OS level, Google has been far more willing to let device makers customize Android than Microsoft ever would have been or probably will be. While Apple's closed ecosystem gives you an experience that's something like an elevated McDonald's (tastes the same everywhere), Android makes it a free-for-all that appeals to developers and users. That's not to say that the features and user interface and price and performance of devices and operating systems don't matter, but it appears that other things, such as an open ecosystem, matter just as much.

So, had Intel and Microsoft been more on their game, would it have made a difference? Of course, it would have mattered some--instead of a two-horse race between iPhones and Android phones, it would have been a three-horse race. But I doubt Wintel could have ever dominated phones and tablets like it does PCs and notebooks.

Art Wittmann is director of InformationWeek Reports, a portfolio of decision-support tools and research reports. You can write to him at [email protected].

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