Apple’s iPAD 3 Kicks Off a Season For Silicon Valley Re-Alignments

The Corporate PC may finally be on life supports and with it the purveyors of the hardware and software solutions as consumer adoption of new technology outpaces the carefully planned IT budgets that guarantee positive 3 year Returns on Investments (ROI). The Apple of the consumer’s eye will soon feast on the iPAD 3 with its retina display and 4G LTE that untethers the productivity class for good from centralized IT departments. It’s “Ash Heap of History Time.”

If it were just the iPAD3 that was rolling out, you could push back and say, Please! However, quick to follow will be redesigned MAC Air’s and MAC Book Pro’s that will feature Intel Ivy Bridge processors and 4G LTE as well. Then the IT department has to admit that the “Cloud” is everywhere and that it no longer makes sense to deal with all the complexity of software versions and updates between the various versions of Dell and HP PCs.

The pain will soon start to get extreme for Microsoft and Google as the train that left the station years ago in terms of the mobile hardware that rests in the users hands on a 24/7 basis will be available from just one vendor: Apple. A sign that chaos reigns is when those on the defense start coming up with half answers. For example, Microsoft is rumored to be working on a version of Office for iOS. That’s nice and what is the price? Surely much less than a version delivered on a Microsoft Cloud. By relying on Nokia and Apple to deliver the hardware, Microsoft falls into a two degrees of separation gap from the end customer. Meanwhile Intel ships Xeon’s at ever increasing prices to Microsoft’s data center and to those of Google and Facebook. The Intel bacteria have glommed onto the Data Center Host.

Is the Motorola alliance with Intel for Smartphones an all encompassing one that precludes the use of nVidia or Qualcomm. What about tablet and Ultrabooks? When will Google/Motorola wake up and see that their main revenue stream of search can be redirected by Siri to the iCloud? Time to consider Andy Grove’s dictum: “Only the Paranoid Survive.”

It is truly historical to observe the alliances that are breaking under the duress of Apple’s assault and the resulting ones to form as a means to stop the blitzkrieg. Intel’s client price and delivery model now revolves around the Apple MAC Air. The pricing every other OEM gets has to be higher than Apple’s. And so, every other OEM and partner is a 2[SUP]nd[/SUP] class citizen sitting at the back of the bus. Apple data centers will receive favorable Xeon treatment. However, what if Google went to Intel and promised to up the server buy while also planning to build 10M tablets a quarter based on Atom. Intel would need to consider a front of the bus seat unless Apple A6 is already taped-out in 22nm.

An Intel no bid to Google then leads to the next scenario – a Google/AMD joint venture on x86 Server Processors and possibly a low cost x86 mobile processor for ultrabooks, so that the search bar remains “Google”. The same scenario could play out for Microsoft and AMD. This is what will make the semiconductor industry extremely interesting over the next several years.

On the semiconductor side, Qualcomm has to consider scaling dramatically in 2012 as they leverage their 4G advantage. Paul Otellini, Intel’s CEO claimed in the last earnings conference call that the communications silicon is being pulled into the x86 platform. In one way or another, Intel is forcing Qualcomm to retreat into an IP mode or to man up in a Jerry Sanders fashion. Furthermore, Qualcomm has to realize that if Intel seeks to own Ultrabook down through tablets to the smartphones then Qualcomm has to make a maximum thrust into the ultrabook space and it can’t be with just ARM. A Qualcomm – AMD “x86 Snapdragon” would allow them to increase the penetration of the communications content just as the x86 value piece is waning. In reality the x86 and ARM cores are both diminishing as a percentage of the overall mobile platform.

We live not only in interesting times but one that is about to have incredible amounts of upheaval. Not all of the Paranoid will Survive.

FULL DISCLOSURE: I am long AAPL, INTC, QCOM, ALTR