How the war between tablets and PCs will unfold

When schools in Idaho — hardly America’s most progressive state — announce they’ll be spending big bucks on tablets, you know just how widely those mobile devices have penetrated the mainstream market. And when you consider that consumers worldwide downloaded more than 200 million tablet applications during Christmas week alone, you get a sense of the enormous opportunity tablets present to developers, as well as chipmakers and device manufacturers.

That’s no news, of course, to companies like Intel, AMD, and Microsoft, whose businesses are rooted in the old desktop-centric computing model. On one hand, the strategic landscape in 2012 is largely being shaped by the collision of two very different computing models: tablets and PCs. On the other hand, providers on both sides of the strategic divide are rapidly hedging their bets.

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You’ll see that next week at the Consumer Electronics Show (CES), where Qualcomm says it will unveil a PC based on its ARM-licensed chips. In addition, Intel is expected to formally announce availability of its low-power “Medfield” chips for mobile devices and to continue its efforts to make laptops more competitive with tablets by pushing the so-called Ultrabook as an alternative.

Meanwhile, Microsoft is not only hedging its bets by making Windows 8 capable of running on an ARM-based device, it’s hedging its hedge: An ARM-based Windows device won’t be able to run the Office-type “Win32s” applications that are the main reason people continue to run Windows in huge numbers.

No one is going to score a knockout punch this year. It would certainly make a more exciting story if that were the case, and too many pundits think they can make it so by simply saying it. Instead what we’ll see is a series of skirmishes along the edges: Wintel will make some inroads into the mobile arena via Windows 8 tablets, while some (but not that many) consumers and businesses will decide that they no longer need conventional PCs.

There is, though, one company that’s guaranteed to win big this year — and it is Apple.

Businesses will buy both tablets and PCs Although users have been the first to pick up the tablet, there’s increasing evidence that businesses are doing the same. Most recently, a survey by the NPD Group found that nearly three-quarters of U.S. small and medium-sized businesses are planning to buy tablets for employees in 2012. And despite efforts by Google, Samsung and others, “tablet” still means an iPad.

“Businesses of all sizes appear to be determined to capitalize on the tablet phenomenon,” says Stephen Baker, vice president of industry analysis at NPD. “The iPad, just as it is in the consumer market, is synonymous for ‘tablet’ in the business market, leaving Apple poised to take advantage of the increased spending intentions of these [small businesses]. NPD’s research shows that iPad purchase preference is higher among larger firms than smaller ones, which is an important indicator that Apple is gaining traction far outside its typical consumer space.”

So is the PC getting the boot from the critical small-business arena? “While the market speculation spins about the decline in the PC market, it remains apparent that someone forgot to tell the customers,” Baker writes in a blog post. “Spending continues on PCs and on tablets — and few companies, even the smallest ones, are significantly reallocating their spending away from the personal computing needs of their employees.”

Intel vs. Qualcomm: An uneven match Another exaggerated story line is the threat that ARM chips pose to Intel in the laptop market. Sure, Qualcomm will unveil something like a PC next week, but what anyone will be able to use it for is hardly clear.

“I’m quite skeptical,” says Dean McCarron, principal analyst at Mercury Research. The software infrastructure is dominated by the classic x86 architecture of Intel and AMD. In particular, Windows 8 on ARM will not support binary translation (meaning the ability to run the standard Win32s x86 apps natively), so any apps written to run on ARM will have to be rewritten from the ground up. (Apps written for Window 8’s Metro UI will run on both ARM and x86 devices.)

Here too there is some nuance. McCarron notes that the rise of the app stores will make it easier for developers to write and sell Metro-specific apps that could get some traction with the public. And plans on the drawing board for new chips by Qualcomm and Nvidia, expected to debut around 2015, could change the game by powering more than just tablets, increasing the incentive for developers to support Metro, he says.

Intel, meanwhile, is making significant progress in developing low-power chips for mobile devices. While it clearly has a ways to go before it challenges Qualcomm, “we will ultimately see convergence in power consumption” between Intel’s x86 chips and Qualcomm’s and others’ ARM chips, says McCarron.

What’s more, Intel is putting significant muscle behind Ultrabooks, which is essentially a thin and light laptop that sports extended battery life and rapid boot capabilities. In part, that’s a response to Apple’s success with the MacBook Air, but it’s also an attempt to make PCs seem as cool as tablets.

The bottom line: We’ll see lots of skirmishing, posturing, and positioning this year. A new computing model is arising, but don’t believe the pundits who tell you the old one is dead.

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