Once upon a time, Microsoft Corp. and Intel Corp. were the drivers of innovation and growth through an extended channel ecosystem that included major manufacturers such as Hewlett-Packard Co. Now, these two powerhouses are competitors to their longtime allies, says HP CEO Meg Whitman.
Since last year’s launch of the Surface tablet, rumors have persisted HP and other PC manufacturers were upset Microsoft would field its own devices rather than rely on OEM partners. Only Acer Inc. was public about its discontent with Microsoft’s device ambitions.
On the eve of Surface’s first anniversary and the launch of the tablet’s second generation, Whitman says Microsoft and Intel are competitors as much as partners.
“HP’s traditional highly profitable markets face significant disruption. Wintel devices are being challenged by ARM-based devices,” she said at an analyst meeting last week. “The disruptive forces are very tough and very real, and they are accelerating. We are seeing profound changes in the competitive landscape. Our competitors are expanding across the IT stack. Current partners like Intel and Microsoft are turning from partners to outright competitors.”
For more than two decades, Intel and Microsoft have acted more than just suppliers of components that make PCs run; they’ve been primary drivers of form and function.
Intel, the world’s largest supplier of computer processors, has dictated form factors, features and device layouts by designing chipsets, hard drives and motherboards around which chases and cases are designed.
Microsoft Windows, the dominant operating system powering more than 80 percent of the world’s PCs, have worked with companies such as HP and Dell to integrate embedded software with devices to accrete value.
Both Intel and Microsoft have supplied funding, too, to OEMs and partners. Through this funding and smart marketing, businesses and consumers have become accustom to buying devices certified as compatible with Microsoft software and having Intel’s processors.
Just as Microsoft is plying the device waters, HP is diversifying its PCs by adopting more of Google’s products. Last week, HP launched two new Chromebooks, PCs built on Google’s Chrome operating system and integrated with its cloud-based products. And, unlike many of the previous Chromebooks released by vendors such as Acer and Samsung, HP is pushing these Chromebooks through the B2B channel.
“An opportunity clearly exists in this space, as research from NPD Group has found that Chromebooks have – in just the past eight months – snagged 20 percent to 25 percent of the U.S. market for laptops costing less than $300. Our experience has seen demand across the B2B space, as more and more of our business customers understand the value of these affordable notebooks,” HP said in a statement to Channelnonmics.
PC sales are expected to slide up to 9 percent this year. This follows last year’s decline of nearly the same amount as end users and businesses migrate to tablets and smartphones. HP and other PC vendors blame part of the decline on Microsoft’s Windows 8, the company’s first touch-based operating system, which came to market three years after Apple’s iOS on tablets.
But the rising competitive posture of Intel and Microsoft go well beyond PCs. Whitman cited Intel’s entry into security software and systems, namely the 2011 acquisition of McAfee, as a source of competitive tension. At McAfee’s Focus conference earlier this month, the vendor pushed concepts of greater security intelligence though next-generation firewalls and security information management. These are two products that HP has well-established presence.
Microsoft, too, is competing with HP in enterprise systems, providing the tools and operating systems for data centers and server management.
The notion that Microsoft and Intel are competitors is not new. While Cisco will publicly call Microsoft a strong partner, insiders and partners say Cisco is vexed by Microsoft’s ambitions in unified communications. Cisco even tried to block Microsoft’s acquisition of Skype. Microsoft is also competing against virtualization vendors such as VMware and Citrix with its Hyper-V products.
Similar competitive shifts are happening across the tech marketplace. And these shifts will continue to accelerate as vendors look to replace revenue from declining products and push into new technologies and markets to drive incremental growth. Whitman’s admission is the first major acknowledgement of this shift and how it’s rewriting the competitive landscape.
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