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We're in the Tablet Age; Microsoft Is in the Stone Age

Stocks in this article: AAPL AMZN GOOG HPQ INTC MSFT

NEW YORK (TheStreet) -- Over 20 years ago, I wrote a book that considered the future of tablet computers: A Guide to Field Computing, for New Riders Publishing.

It sold poorly. It was before its time. And it is long out of print.

Ten years later, Microsoft (MSFT) coined the term "tablet" with the Microsoft Tablet PC specs in 2001. They had Hewlett-Packard (HPQ) deliver a unit with a removable keyboard soon afterward. It, too, was early, and sank without a trace.

It was Apple's (AAPL) 2010 launch of the iPad, based on its iPhone, which launched the tablet market as we know it. Samsung's Android-based "phablet," a small tablet that acts as a phone, transformed tablets into a highly competitive and global mass market in 2011. The first Amazon (AMZN) Kindle came out in 2007, but it was 2011's Kindle Fire that tied tablets securely to content.

Now, as 2014 dawns, everyone knows we live in a tablet age. Intel (INTC) and Microsoft, which so dominated the PC era that analysts called them "WinTel," now face an uphill battle for traction in a field they created.

Intel's response consists of two "reference designs" for tablets, which other companies are expected to make and sell. They are a clamshell unit with a keyboard, shown running Windows, and an "education Android" based on Google's (GOOG) Android system.

They are designed for mass sale to schools, complete with theft deterrent features, and were introduced at a London education conference.

Microsoft, which merely supplied software in the PC age, is a manufacturer in the tablet age. Its Surface 2, a $450 unit that runs Windows 8.1, ships directly from Microsoft's online store. A fold-down keyboard can act as a front cover; a back cover doubles as a stand.

Microsoft brags it sold $893 million worth of Surface tablets during the quarter ending Dec. 31. But it lost money in the business, and those sales don't begin to make up for the accelerating decline of PC shipments, a quarterly reduction of 6.1 million units, or 6.9%, year over year according to the research company Gartner. In the U.S. market alone, shipments fell almost 1.3 million, or 7.5%.

None of this is news, save for the fact that it has become such conventional wisdom among investors and analysts that Intel shares are considered dead money and the company is cutting its workforce 5%. Former Intel employees have launched an online revolt against its policies.

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