The faster-than-expected ramp of ARM processors for tablets running the Windows 8 operating system is a potential source of upside for Nvidia, Inc. (NASDAQ:NVDA)
Assuming Windows 8 released in the second half of 2012, there will be initial limited acceptance as premium pricing of over $500 and the lack of compatibility for legacy x86 applications will likely confine the initial market opportunity.
"We believe critical to the success of ARM-based Windows 8 PC/tablets is that they establish a clear value proposition vs x86 equivalents, especially as Microsoft has not yet enjoyed commercial success with Windows Phone 7," UBS analyst Uche Orji wrote in a note to clients.
Windows 8 is inspired from Windows Phone 7's critically praised Metro user interface for ARM processor-based smartphones. But it has still failed to enjoy broad success both in terms of user adoption and apps and a simliar risk exists for the updated version of Metro that runs on a larger-sized tablet display.
As a result, Orji said Windows 8 ARM-based PCs/tablets may struggle to establish a solid market position over a similarly priced iPad 3 or a lower priced Android-based Asus EEE Transformer Prime.
In addition, users who care about running Microsoft Office and want something small and thin, are expected to prefer a modestly higher priced x86-based ultrabooks/tablets that will offer both better performance and the security of a "legacy Windows 7 mode."