Intel's New Best Friend May Be Google's Worst Nightmare
What do you call a company that dominates one industry that is slowly declining, while the industry that offers the most hope represents less than 10% of its business? Intel .
Not that many years ago, Intel was one of the most loved technology stocks. The company spent billions more on research than its closest competitor produced in sales, and Intel was inside everything. Things have changed for the chip giant, but ironically, Intel's future could come from software, of all things.
Left behind by mobile
It's no secret that Intel has been largely left behind by the mobile revolution. If you need proof, consider that the Intel division that includes chips for tablets and smartphones generates just 8% of the company's revenue -- and this percentage is actually down from 9% two years ago.
Some of the biggest names in mobile aren't chip-related at all. Google has a commanding presence based on the Android operating system. Apple sells more than 50 million iPhones and more than 25 million iPads in a quarter, and most people call it a "disappointment."
Even Intel's old bedmate, Microsoft , seems to have finally found the key to mobile growth. The company's Surface business more than doubled last quarter, and Windows Phone is on track to take market share over the next few years.
So how does Intel get back in the game? In the most unlikely way of all: a partnership with Samsung. To be more accurate, through Intel's membership in the Tizen Association.
A balancing act
Tizen was essentially born from a frustration with Google's Android dominance. Tizen's white paper says it best: "Tizen represents a clear opportunity to bring balance back to the mobile industry."
Some might believe that this refers to Apple, but that would be inaccurate. Though Apple sells millions of iPhones, the iOS system only held 12% of the global smartphone market at the end of 2013. On the other hand, Android carried a nearly 82% global market share.
The fact that Samsung shipped more than 32% of all global smartphones at the end of last year is hardly surprising. The success of Samsung has largely come on the back of Android. However, Samsung apparently isn't satisfied with the status quo. From a desire to break free of Google's influence, and a desperate attempt by Intel to gain relevance, Tizen was born.
The fastest-growing mobile software isn't Tizen, Android, or iOS
A few years ago, Windows Phone took a tiny percentage of shipments, and the real battle was between Android and iOS. According to IDC Research, that relationship has changed. Windows Phone is projected to move from 3.6% market share at the end of 2013 to about 7% by 2018.
Android and iOS are expected to grow by 11% and 10% annually through 2018, compared to a nearly 30% annual growth rate from Windows Phone. This should be great news for Intel, as the company has long counted on Microsoft for its dominance in the PC industry. However, most Windows Phone models still run on some version of the ARM architecture, which leaves Intel out in the cold.
As the two primary backers of Tizen, Samsung and Intel have very specific reasons to make this software successful.
- First, out of necessity. Android dominates smartphones, and with the release of Android Wear for wearable devices, this dominance looks to continue as the mobile device landscape expands.
- Second, Tizen software supports a program called Application Compatibility Layer, which allows Tizen devices to run Android apps with 100% compatibility and at native speeds. Having the ability to run hundreds of thousands of apps out of the gate is critical in mobile.
- Third, Intel desperately needs Tizen to succeed. The company still gets more than 60% of revenue from PCs, and mobile devices are cannibalizing this business. As the only pure chip partner on the Tizen board and one of the two main forces behind the OS, you better believe that if Tizen becomes a new mobile force, Intel will be inside.
Samsung has already brought Tizen to the Samsung Galaxy Gear 2 and a few other devices. Now it's time for the OS to make a grand entrance. Intel is expected to announce its next generation of chips in the second half of 2014. Could these new chips power a lineup of Tizen smartphones? If Samsung and Intel have anything to say about it, the answer is likely yes.
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The article Intel's New Best Friend May Be Google's Worst Nightmare originally appeared on Fool.com.Chad Henage owns shares of Apple and Microsoft. The Motley Fool recommends Apple, Google, and Intel. The Motley Fool owns shares of Apple, Google, Intel, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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