I’m impressed with Intel. I’m unimpressed with Microsoft.
Together, these two companies ruled the PC era. While numerous PC manufacturers came and went, you could count on these two companies contributing to each desktop you brought home. That era, however, is over.
As Benedict Evans shows in this chart, smartphones are about to pass PCs worldwide. Tablets are also gaining ground, and I see little reason why these trends would drastically change soon:
Putting aside these companies as investments, I’ve been thinking about each on a qualitative level. The recent decisions regarding Microsoft’s leadership show a company trying to recapture its former glory. After being run by a businessman for 14 years, they’re returning to an engineer CEO. Furthermore, Bill Gates is returning to an active role. This signifies a desire to operate, grow, and – most importantly – think like the company did in its heyday. That may be an improvement over today’s Microsoft, but I believe it to be inadequate to compete in the markets where the company hopes to thrive. Today’s competition is too fierce, too dynamic, and simply too far ahead for Microsoft to catch by trying to recapture the magic.
I want to clarify that I’m not criticizing the choice of Satya Nadella, personally. By all accounts he is capable and bright, and could very well lead Microsoft to improved fortunes. Furthermore, I’m generally skeptical that “superstar” or “celebrity” CEO hires are worthwhile; Alan Mulally would have been a sexy pick, but what the hell does he really know about the technology industry after 45 years at Boeing and Ford? I think he would have found competing against Google much more daunting than battling GM and Chrsyler.
Intel, on the other hand, is showing signs of promise. At CES, the company gave viewers insights into its upcoming products and focuses. It showed off Jarvis, a wireless headset that functions without the cloud (damn you, Siri!!). It revealed a look at a wireless charging bowl for consumers to drop gadgets into. It also accentuated its new fixation: “make everything smart.” In other words, Intel is undertaking a widespread effort to expand the market for wearables – everyday devices (i.e. glasses, clothes, watches, etc.) with a computer chip put inside.
I was impressed because Intel appears to be thinking ahead. Don’t fall into the trap of chasing Google, Apple, and Samsung! Instead of focusing the announcements on new tablet chips, for example, Intel spent a good portion of CES talking about wearables, a segment that shipped 8.3 million units worldwide in 2012! At this point, it’s going to be tough for companies to beat Google at search or Apple at premium phones. Microsoft has tried and failed on both. So, what is Intel doing? They’re recognizing that they missed on smartphones and tablets. Instead, they’re trying to position themselves to reclaim dominance when the consumer electronics market moves onto the next thing. More broadly, to quote Sun Tzu:
“He will win who knows when to fight and when not to fight,”
“There is no instance of a country having benefited from prolonged warfare.”