MIDs haven't made it, but Intel is undaunted

Stop me if you've heard this one before. . . BusinessWeek reports that Intel is readying a big push for a new class of handhelds known as MIDs, or Mobile Internet Devices.
Written by John Morris, Contributor

Stop me if you've heard this one before. . . BusinessWeek reports that Intel is readying a big push for a new class of handhelds known as MIDs, or Mobile Internet Devices.

Intel has been talking up MIDs--devices that sit awkwardly between a smartphone and a netbook--for the better part of two years. Despite its efforts, the MID seems like a product that exists only at tradeshows, where the Intel booth is often jammed with prototypes from Aigo, BenQ, Gigabyte, Lenovo and others that virtually no one uses in the real world.

What is new is that Intel is getting set to release its Moblin 2 operating system for these devices. Moblin is based on Linux (Intel has apparently been hiring some noted Linux developers) and it will be distributed by Canonical (the Ubuntu people) and Novell. At Mobile World Congress in Barcelona later this month, Intel plans to announce several new MIDs--including ones from new hardware partners--based on Moblin 2, according to the BusinessWeek story.

Why is Intel doing all this? The original rationale was that it needed a home for its Atom processor, which is too power-hungry for smartphones but not powerful enough for full-fledged notebooks.  Instead Atom found its niche in netbooks. During a horrible fourth quarter, Atom sales actually grew into a $300 million business.

But the surprising success of netbooks has a downside for Intel, Microsoft and the PC companies. It may be cannibalizing sales of higher-priced laptops--though the extent of this is a matter of debate--and is almost causing notebook prices to fall even faster than usual. (See "$200 Laptops Break a Business Model" in today's New York Times.)

In addition, Intel has long-term plans to compete against companies such as Samsung, Qualcomm and Texas Instruments, all of which develop ARM-based application processors for smartphones. The handset market dwarfs PCs, and smartphones are the fastest growing segment. The next version of Atom, code-named Moorestown and due out late this year or early 2010, was supposed to get Intel into smartphones, but lately the company has been signaling that it will also be used in larger devices. All of this explains why Intel still hasn’t given up on MIDs, which are really an interim step.

The conventional wisdom is that MIDs are destined to fail because they occupy a no-man's land between smartphones and laptops. No one wants to carry a third device. There's some truth to this, but I don’t think that's the main issue. After all, there already is one successful MID: the iPhone/iPod Touch. Sure, the iPhone has voice as well as data so, strictly speaking, it isn't a "third device." But I know plenty of people who carry both a BlackBerry and an iPhone. The bottom line is that the iPhone and iPod Touch are really great mobile Web browsers--which is Intel's chief argument for the MID as well.

In other words, a good MID could carve out its own market. The bigger issue with MIDs may be that they pit Intel against some of its own customers and partners. Apple doesn't use Atom, but it does use Intel chips in Macs. Microsoft had to scramble to beat back Linux on netbooks (successfully, it seems), and now Intel is developing a Linux platform that competes with Windows Mobile? It's little surprise that neither Apple nor Microsoft sees much of a future for MIDs.

Initially Intel was counting on Mobile WiMax to jump-start the MID market. That seemed like a smart strategy because it would let Intel and its hardware and software partners do an end-run around the wireless carriers and offer wireless broadband at a lower monthy rate. But because of Sprint's business challenges and other issues, the buildout of the WiMax network has been slow, so expect to see a lot of new MIDs that offer both WiMax and standard 3G options. Ultimately the market for mobile devices that provide fast and complete access to the Internet anywhere, anytime will be so large that there should be room for gadgets of all shapes and sizes from smartphones to ultraportables--regardless of what we call them.

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