Intel Corporation (INTC): Microsoft Corporation (MSFT)’s Surface 2 Is a Mistake

For example, ASUS just announced its latest Transformer Book T100, which is a full Windows 8 10.1,” fanless tablet with a quad core Atom Z3740, 2GB of RAM, a full copy of Microsoft’s Office Home & Student, a nice detachable keyboard, and 32GB of storage all for $349 (a 64GB version can be had for $50 extra) – and this is just the first device. Why does Microsoft Corporation (NASDAQ:MSFT) feel the need to compete with its customers, and why does it feel that it can do so with a less capable product?

If Microsoft builds its ARM-based “Surface 2” in any meaningful quantities, it is at significant risk of taking yet another inventory writedown.

So, what’s the bottom line?
Intel Corporation (NASDAQ:INTC)’s Windows market share in tablets (which is nearly 90%) is safe and, if anything, will grow as many other tablet vendors ditch RT and rally behind full Windows 8 and Intel’s latest chips. ARM won’t be affected either way by this, as it still has a dominant presence in Android tablets. NVIDIA Corporation (NASDAQ:NVDA) will benefit from the initial build out of these devices, but the vast majority of its tablet sales will, too, be on Android based devices, so don’t count on anything huge from Surface 2.

As far as Microsoft goes, it’s going to have to stop trying to displace Intel as the de-facto chip vendor for Windows based products. In fact, I believe Microsoft needs to fully embrace Intel as a major partner that can help it gain share against iOS and Android. There’s no other chip company that has the scale and hardware partnerships that Intel has, and Microsoft would do well not to antagonize the chip giant.

The article Microsoft’s Surface 2 Is a Mistake originally appeared on Fool.com and is written by Ashraf Eassa.

Ashraf Eassa owns shares of Intel and NVIDIA. The Motley Fool recommends Intel and NVIDIA. The Motley Fool owns shares of Intel and Microsoft.

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