Intel Can't Topple Apple's Portable Stronghold

I'm not sure Intel (NAS: INTC) really thought this ultrabook thing through.

The chip giant is launching a whole new style of thin and light notebooks amid great pomp and circumstance. Intel aims to push this form factor into about 40% of all new notebooks sold the near future. If the Apple (NAS: AAPL) Macbook Air can grab the hearts and wallets of consumers even in the middle of a crisis-tinged economy, why wouldn't a cheaper version running Microsoft (NAS: MSFT) Windows do even better?

Pricing is a crucial part of that puzzle, and Intel wants ultrabooks shipping below the magical $1,000 benchmark. But you know, ultralight LCD screens are expensive. So are space-saving solid state drives. And then Intel expects to make a large profit on the central processors? Sure, Apple can squeeze the Air down to $999, but Cupertino is notoriously efficient and doesn't pay Microsoft for an operating system.

"Forget it," say at least two Asian system builders. Acer Taiwan and Compal Electronics are asking Intel to lower prices on its ultrabook-bound Core chips, according to Taiwanese tech watcher DigiTimes. Compal who? The Chinese systems builder actually makes many of the systems you buy under the Dell (NAS: DELL) , Hewlett-Packard (NYS: HPQ) , and HP's Compaq brands, among many others. These guys are visible from space.

If not, they might settle for lower-priced Cores, maybe even low-power Atoms. Or -- perish the thought -- just take the general architecture of the ultrabook over to Intel's arch-rival Advanced Micro Devices (NYS: AMD) , maybe even mobility expert ARM Holdings (NAS: ARMH) and its army of chip-building partners.

Then what do we have? In the worst-case scenario, Intel will have angered Apple (don't forget that the Macbook Air runs on Intel chips, too!) and sent other partners straight to the competition. Less drastically, Intel would drop its selling prices and margins. Or, the whole ultrabook idea could just flop in the face of Apple's terrific execution.

I don't see any fantastic outcomes for Intel here, as the options range from bad to worse to disastrous. Back to the lab again, folks -- this is not how you win Mr. Softy's love back, or how you juice product margins. Maybe CEO Paul Otellini should watch this free video report to see how the competitive landscape is changing under his feet. Go ahead and watch it right along with Paul.

At the time thisarticle was published Fool contributorAnders Bylundholds no position in any of the companies discussed here. He's kidding about Otellini needing a primer on cloud computing, all right? The Motley Fool owns shares of Microsoft, Intel, and Apple and has bought calls on Intel.Motley Fool newsletter serviceshave recommended buying shares of Dell, Apple, Microsoft, and Intel, creating bull call spreads position in Microsoft and Apple, and creating a diagonal call position in Intel. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. You can check outAnders' holdings and a concise bio, follow him onTwitterorGoogle+,or peruseour Foolish disclosure policy.

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