On October 26, 1999, Microsoft (NASDAQ:MSFT) and Intel (NASDAQ:INTC) were added to the Dow Jones Industrial Average as component stocks. In retrospect, however, the October 26 date may have marked the apex of the PC revolution and Wintel (Windows + Intel) partnership. Intel shares closed out the October 26 trading session at a split adjusted $26.79. Nearly fifteen years later, on June 6, 2014, Intel stock changed hands at $28.17 per share. Both Intel and Microsoft have remained largely shut out of the secular shift in consumption out of the PC and towards mobile computing. For Intel, the Microsoft Surface Pro 3 will prove to be too little, too late for the chipmaker to finally compete against the likes of Qualcomm (NASDAQ:QCOM) and ARM Holdings (NASDAQ:ARMH) in the mobile chip market.
Microsoft Surface Pro 3 Competition
Microsoft Surface Pro 3 machines are now available for pre-order. Surface Pro 3 orders will be shipped out by August 31, 2014 at the latest. Microsoft has aggressively promoted the Surface Pro 3 as “the tablet that can replace your laptop.” Surface Pro 3 prices range between $799.00 and $1,949.00. Be advised that Surface keyboard covers are sold separately for $129.99. At this price point, the Surface Pro 3 would compete directly against the Apple (NASDAQ:AAPL) MacBook Pro.
Intel Core i3, i5, and i7 chips power the Microsoft Surface Pro 3. Interestingly, Intel Core i3, i5, and i7 CPUs are also the engines driving the MacBook Pro laptop computers. At best, Microsoft Surface Pro 3 sales may simply cannibalize MacBook Pro sales, which would cancel out the prospects for real growth at the Intel bottom line. In Q4 2013, Microsoft did take a $900 million charge to write down Surface RT inventory. Going forward, Microsoft may curtail Intel chip orders and limit Surface Pro 3 production in order to avoid another embarrassing write off.
Interestingly, the Surface Pro 3 marketing apparatchik has all but failed to acknowledge the Apple iPad. A May 1, 2014 report out of research firm International Data Corporation identified Apple as the top tablet vendor on the market after it shipped out 16.4 million iPad units through calendar Q1 2014. For the sake of comparison, fifth-ranked Amazon shipped 1 million tablet units during Q1 2014. Microsoft, for its efforts, failed to crack the top five list.
The A7 chip now functions as the nerve center for the iPad Air and iPad Mini. Apple designs its own A-Series chips, according to ARM architecture. Alternatively, the Qualcomm Snapdragon system that powers popular Android tablets is also based upon ARM architecture. For Intel, the Surface Pro 3 event will do nothing to change the dynamics of the mobile market. Intel will remain all but shut out of mobile.