When a tech juggernaut picks a relative newcomer’s equipment over the existing tech titans, it’s time to pay attention to the opportunity, writes Paul McWilliams of Next Inning Technology Research.
There was quite a buzz late this month generated by the news Apple (AAPL) added a few lines to the code that provide support for Marvell Technology Group’s (MRVL) new quad-core Armada XP processor.
Speculation was rampant and included rumors there was a new MacBook Air in the works that would use MRVL in place of the current Intel (INTC) offering. Other rumors suggested AAPL was in the process of designing a new server to be used for internal applications like iTunes or the new iCloud.
As I wrote several years ago, when AAPL purchased Palo Alto Semiconductor (PA Semi), and reiterated when AAPL bought an architectural license from ARM Holdings (ARMH), I think there is a risk that AAPL will move its computing platform to an internally designed ARMH core chip.
However, due to the acceleration of INTC’s roadmap, I think the date of that risk has been at least pushed out, if not averted entirely.
Remember, PC products are sold in much lower volumes at AAPL, and a change in the processor platform carries with it a number of impacts and distractions I simply don’t think AAPL should try to deal with at this stage of the game. I think given the fact the price of INTC was moving up Friday, right along with MRVL, suggests the market was seeing this in a similar light.
So, if not the MacBook Air or a new server design, the question lingers—why would AAPL adapt for the new MRVL processor?
As I see it, there are two rational reasons. One would be to evaluate the MRVL chip in comparison to an upcoming AAPL-designed quad-core processor. Remember, AAPL’s first processor, the A4, was simply a copy of the Samsung processor it had been using all along.
The second, which is known as the A5, was an AAPL-designed dual-core with substantial video processing capability that I’ve yet to see fully defined. As I see it, it’s only logical to assume a quad-core has been developed and will be released in the not too distant future—maybe in the iPhone 5 or iPad 3.
The second possibility I see is using MRVL in an entirely new iOS device—maybe the rumored iTV. While it would seem that a quad-core processor would be overkill for a TV, I think we have to assume that if AAPL in fact releases a TV under its brand name, it will be quite different from what we’re used to seeing.
It would, of course, have Apple TV embedded, quite likely a remote that looks a lot like a mobile iOS device (iPod or iPad), and support some degree of native computing power.
Bottom line: Even if AAPL was simply benchmark testing the new MRVL processor, I see this as a positive move for MRVL. A benchmark test effort would strongly suggest AAPL sees MRVL’s quad-core as a strong product and believes it must be ready to compete against it.
The other alternative of intending to use it would be better, and clearly a huge upside for my bullish thesis. However, as I’ve outlined in the past, I think MRVL is a good speculative investment without any consideration its processors will be used by AAPL.
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