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December 8, 2010 Previous day Next day

Intel has confirmed the formation of a new netbook and tablet computing group and shifted Doug Davis, Intel vice president and general manager of the Embedded and Communications Group, over to lead the effort. The move happened several weeks ago, but was only confirmed officially today by an Intel spokesman in a New York Times story. Ton Steenman, currently vice president and general manager of the Low-power Embedded Products Division, will become the new general manager for the Embedded Computing Group. Intel President and CEO also said today the company was tracking 35 tablet design wins and said he expected more news at the International Consumer Electronics Show in January, see related Intel Free Press story.



Intel President and CEO Paul Otellini defended the PC market today and said the company is still on track to have the "best year ever" amid the rapid growth of tablets and smartphones where Intel is currently behind competitors.



Speaking to investors at a Barclays Capital event in San Francisco, he said demand for the company's latest Core microprocessor line, codenamed "Sandy Bridge," is "very very strong" and is shaping up to the "best product we've ever built."


"It's fashionable to write off the PC but it just keeps going," Otellini said, invoking a term former Intel CEO Andy Grove once used, calling the PC a "Darwinian device." In terms of sheer scale, PCs are also shipping in the millions per day, compared to a several million per quarter for the iPad.


Otellini said what is driving PC growth, in addition to a strong corporate refresh cycle buoyed by sales of Microsoft's Windows 7, is the trend toward higher incomes and multiple PCs per household even outside the United States. He showed data that indicated the cost of buying a PC over the past several years has gone from about 5 weeks of income to less than half a week of income in the United States, and from 30 weeks to 7 weeks in China. He said the company is seeing similar trends in Eastern Europe and Brazil, Latin's America's biggest market.


"Going forward the PC will get more affordable not because the price is coming down but because incomes are going up," Otellini said.


Similarly, the trend toward multiple PCs per household, already above one per home domestically, was trending the same way in Eastern Europe and other geographies.


He was bullish on the company's upcoming Sandy Bridge launch.


"This is the best product we've ever built, demand is very, very strong, and our customers are excited," he said. "It has better energy efficiency, better floating point performance and better visual performance. This is the first time we've used our leading-edge manufacturing technology to build the graphics directly onto the silicon die. "


Otellini said the result of integrated graphics, leading-edge manufacturing and built-in accelerators meant Sandy Bridge graphics would now outperform low-end discreet graphics cards and result in lower cost for Intel's customers. He also hinted at additional features the company would disclose at the official product launch next month at the International Consumer Electronics Show in Las Vegas.


"We are very excited about this product and we are shipping for revenue as we speak," he said, foreseeing high volumes but stopping short of offering specific numbers as the company is in its traditional quiet period and the product hasn't launched yet. "This will be our fastest ramp ever; the product is very healthy."


He also addressed some of the tension around tablets and smartphones, where Intel is behind other competitors and has yet to make significant progress in terms of volumes and design wins.


"On tablets, our strategy is very simple: We're going to offer best-in-class hardware and support all the viable operating systems," he said, predicting a series of demos and announcements from customers at CES. He said the company is tracking 35 design wins and listed a few devices currently shipping with Intel processors, including the Cisco Cius for business. But he said the real shift to Intel architecture in terms of consumer devices would come next year and for now, the iPad isn't hampering sales of notebooks as some have suggested.


"I don't think tablets are cannibalizing noteboooks, but they are a competitor for discretionary income," he said. "On the other hand, I have not seen a kid who takes a tablet to school versus a laptop. So I see [the iPad] as a fun device that is additive to the market."


On phones, Otellini reiterated statements made to investors earlier in the year that the company is viewing the challenge in terms of a marathon and not a sprint, yet still promising smart phones with Intel silicon by the second half of 2011. He went on to talk about important chip architecture transitions over the years, and predicted Intel would eventually gain a competitive advantage. This comes amid growing criticism from ARM and its licensees that Intel won't be able to get power down far enough to compete in smartphones.


Dr. Herman Hauser, a co-founder of ARM, even suggested that Intel's business model might be flawed in a recent interview with the Wall Street Journal. "The reason why ARM is going to kill the microprocessor is not because Intel will not eventually produce an Atom [Intel's low-power microprocessor] that might be as good as an ARM, but because Intel has the wrong business model," Hauser said.


"Typically, these architecture transitions take a decade, "Otellini said. "But we have the best silicon technology, a persistent and consistent architecture, a large ecosystem of customers, and global scale. We can do it big, we can do it over the long term and we can do it on a big scale. No other company has this capability and that's what makes us unique."


Otellini was asked whether there was anything that Wall Street misunderstood about Intel and its strategies, given the sluggish growth in its stock amid record revenues and financial performance.


"To make this much money and have the stock where it is is disappointing," he acknowledged. "We said we'd have double-digit growth over the next several years and we've never done that. So you can wait until the stock goes up or you can buy it now."


And speaking of buying stock, Otellini said the company had resumed buy-backs of its stock after more than a year.









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