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Can the Ultrabook save the PC?

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Alex is a member of The Motley Fool Blog Network — entries represent the personal opinions of our bloggers and are not formally edited.

Left: The Acer Aspire Ultrabook.

At the consumer elctronics show 2012 all the PC buzz was around Intel (NASDAQ: INTC)‘s Ultrabook: the sleek, fast, graphically stunning and slim laptop that is meant to rival Apple (NASDAQ: AAPL)‘s Macbook Air and tablets that have been eating up market share from traditional Windows laptops (a market that Intel has nearly a 90% market stranglehold on and almost all of the latest Macs). 

Sales growth of PCs are lagging compared to the booming tablet and smartphone markets. Gartner estimates the worldwide shipment of PCs to decline 1.4 percent from 2010, while another research firm, IDC estimated the loss to be just 0.2 percent. Compare this to tablet PCs 178% growth from 2010 to 2011 and there is a clear reason PC makers are realizing they must revamp their PCs to be viable competition for tablets and not be left in the dust wondering just what went wrong. Technology is the fastest moving industry in the world, and consumer electronics are even faster. Companies that fail to innovate or can’t come out with a completely revamped product lineup in a few months are simply abandoned for cooler and more functional devices from other companies. Devices expire as fast as bagged milk and have become a fashion segment of their own. Take RIM (NASDAQ: RIMM), the Canadian maker of the BlackBerry line of smartphones and communications services. In 2011 alone the company’s stock lost nearly 80% market value and lost 90% market value from August 2008 to the present. The loss was mainly due to market share loss in the smartphone wars against rival Apple’s iPhone and iOS eco-system and Google (NASDAQ: GOOG)‘s Android OS. You can read more about RIM and it’s struggling line of Blackberrys here.

It’s obvious why PC makers like Dell and Lenovo want to get into the Ultrabook game. Intel announced that there will be 75 Ultrabooks coming to the market in 2012 alone with more coming to the table later. Ultrabooks are great looking and apparently (mostly) high performing computers but what really is an Ultrabook is a question lots of people are asking. Defined by Intel (the company that has filed to own the trademark to the name), an Ultrabook is a high end sub-notebook that is under 0.8 inches thick and is slim, light, and has a long battery life without compromising performance that runs on Intel’s chip architecture.

While Ultrabooks are primarily Windows based one might argue that an Ultrabook is simply a Windows Macbook Air (which, like most other Macs runs on Intel). This is the main reason the greatest test for Intel’s Ultrabooks will be out of Intel’s reach: Windows 8. Windows 8 is Microsoft (NASDAQ: MSFT)‘s next generation of operating system that will sport a completely new look and feel that Microsoft has said is the next “generational change” in the Windows OS (the last one being Windows 95 which popularized the GUI and brought us the iconic Start button. While many of the first Ultrabooks will be released on Windows 7 (although they’ll likely be upgradable) the Ultrabook is likely the next generation computer made for Microsoft’s “next generation” operating system. The Ultrabook is in the hands of Windows 8 for better or worse.

Above: The Lenovo Yoga Ultrabook that flips into a beautiful Windows 8 tablet and features a full touch screen and keyboard.

What does the Ultrabook tell us about Intel’s future? For one, that Intel has realized that consumers are moving to mobile devices for more and more of their daily computing and as with all other tech companies, Intel must adapt or die. With it’s recent forays into the smartphone chip market and upgrading of the famous Intel Xeon. Intel is also investing all over the industry to further diversify it’s product range and stay competitive.

As an investment, ntel is very solid trading at 11.64 P/E ratio, paying a dividend of 3.01%, and with a solid beta of 1.08 slightly outdoing the market (1.0) in risk but staying on the low end of other tech companies. While Intel has nearly all the PC chip market and server market there is big room to grow in both developing markets for PCs and developed markets like the States in the field of tablets and smartphones running their chip architecture. With the rise of cloud computing that is expected to grow wildly Intel’s servers will likely be in high demand and considering their current standpoint will be a tremendous source of revenue for Intel.

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