These Companies Will Profit from Intel's Demise

On Tuesday, a monumental piece of news leaked out from the innovation world, and in response, people merely sighed. The news amounts to nothing less than the final piece of the puzzle needed to shatter "Wintel," the combination of Microsoft Windows operating systems and Intel processors that came to define the PC era of computers.

Intel's value is largely impaired thanks to investor fears over tablets and smartphones, an area in which the company isn't currently competitive. However investors who believe the nearly-term threat from these devices is exaggerated are largely correct. Smartphones and tablets combine to make a pretty big wave, yet they're mainly hitting netbooks. After all, Intel wasn't getting stellar earnings from its Atom line that's found in netbooks in the first place, so this loss is overblown. Add on strength in businesses refreshing PCs and servers, and Intel should be fine on short notice.

However, things do look a bit more ominous in the long term. I told my colleague to be on the lookout for the shattering of Wintel, which could happen if Microsoft announced a version of Windows that's compatible with the ARM architecture championed by ARM Holdings.

Why Wintel mattersPeople might be familiar with the term "Wintel" however unfamiliar with the implications of the term and the way it has enabled Intel's nearly-monopoly dominance. In substance, consumer versions of Windows, the dominant operating system of this generation, have worked only on x86 processors, the architecture championed by Intel. The term at first referred to systems bundling Intel processors and the Microsoft operating system, yet today it as well includes processors from Advanced Micro Devices, which are as well based on Intel's x86 architecture.

The last generation of computing

This "Wintel" combination has largely held up through the last generation of computing. It has left Intel as the titan of semiconductors during smaller firms engaged in pricing bloodbaths and brutal cyclical booms and busts that left their value in the gutters. Now, Wintel however faces its greatest threat.

Meet ARM, bringer of deathOn Tuesday, reports from Bloomberg leaked out that Microsoft was developing a version of Windows for ARM-based processors. That means that instead of just working on smartphones and tablets, ARM processors can however be put in day in day out laptops running Windows. That opens up a whole segment of consumer spending for ARM-based processors.

This shift should come sooner than users expect. The example of Intel's relationship with Apple proves especially illustrative in this connection.

Dispute where Intel has been bullying NVIDIA around

Thanks partly to a dispute where Intel has been bullying NVIDIA around, Apple has continued to use ancient Core 2 Duo processors on its Macbook Air line. That's an old processor that should have long ago been replaced, yet despite this limitation, the Macbook Air is wildly popular.

What does that foretell? As we shift to a cloud-based world where most of our computer usage is browser-based, people care less and less about the processor! With Apple pouring hundreds of millions into developing its ARM-based A4 processor, what's to stop that company from programming a new version of OS X to run on ARM-based processors and later releasing a Macbook Air using its own A4 processor? Within a few Macbook refreshes, Intel could find itself in serious trouble.

The bottom lineIntel is facing what I believe to be its greatest challenge but. With Wintel shattering, Microsoft comes out comparatively better. Users will for all that want the operating system they're used to, nevertheless they have less incentive for loyalty toward the unseen processor powering their computer. If competition is open to a vast array of companies producing cheap processors for Windows thanks to its new ARM-enabled version, that hurts Intel's pricing power at the very least. Intel's long-standing competitive advantage of being the leader in the only architecture for Windows is destroyed. Make no mistake: Prices will fall.

The forefront of growth trends

If you're looking for other companies at the forefront of growth trends, The Motley Fool has created a brand new free report called "The Motley Fool's Top Stock for 2011." In it, we reveal the little company set to profit from the broadband Internet expansion. Get instant access by clicking here -- it's free.