Back in the days Intel Corp. and Microsoft Corp., along with select other companies, dominated the market of high-technology products, such as personal computers, with their closely tied hardware and software, which allowed the two to extract the majority of the industrial profits. Nowadays the importance of the so-called Wintel alliance is much lower as ultra-portable smartphones, tablets and other devices are getting more and more adopted by the masses.

“With smartphones and tablets performing tasks previously exclusive to PCs, the computer market has expanded to include other platforms. As a result, Wintel finds itself in the unfamiliar position of dancing to someone else’s tune, following standards that were set by other companies for form factors, user interfaces and even pricing. This means Microsoft and Intel must think outside the box, even if it means adopting strategies that work against each other’s interests,” said Craig Stice, senior principal analyst compute platforms at IHS.

After successfully competing against other developers of operating systems and microprocessors in the seventies and the eighties, Intel and Microsoft remained relatively unchallenged by smaller rivals in the nineties and the oughts. But both giants found themselves confronted heavily by opponents they once considered negligible: ARM and its partners, Google and its Android partners as well as Apple that made a comeback in the oughts under Steve Jobs. But the competition these days is not about the personal computer market, it is for dollars that the end-users pay for their computing gadgets. Since there is no central platform these days (such as Windows-powered PC with Intel Inside was a decade ago), both Intel and Microsoft now have to be operating system and processor architecture-agnostic, respectively. But even in this case, the two will continue to lose market shares going forward, according to IHS iSuppli.

Microsoft’s share of the operating system market for the three major type of devices - PCs, smartphones and tablets - combined is expected to slip to 33% in 2016, down from 44% in 2011, according to an IHS iSuppli report. Meanwhile, Intel’s share of microprocessors will fall to 29%, down from 41%. At the same time, the total size of the market will double from 2011 to 2016, almost entirely due to the strong growth of the smartphone and media tablet segments.

“Wintel now is playing in a new computer market that is a composite of the PC, smartphone and media tablet segments. While this may be a non-traditional way of looking at the PC market, tradition has gone out the window. The smartphone influenced the tablet, the tablet influenced the PC, the PC wants to become more like a tablet and the tablet more like a PC. It’s a vicious circle in which both Intel and Microsoft must take part, but they are losing control of the game and how it’s played. The Wintel camp is not accustomed to following, but with both companies being excluded of the two fastest-growing markets, they are in catch-up mode. Competition is now pushing Wintel to compete and innovate to a much greater degree than in the past,” added Mr. Stice.

IHS predicts 655 million smartphones will ship worldwide in 2012, nearly triple the total for mobile PCs. By 2016, IHS projects that media tablet shipments will surge to 311 million units, about equal to the total mobile PC market at 322 million.

Tags: Microsoft, Intel, x86, AMD, ARM, Windows, Windows 8, Apple, iOS, Android, Google