With tablet chip, Intel tries to lessen its dependency on PCs

Computerworld - With Intel unveiling a tablet processor this week, analysts say the chip maker may be on track to becoming less dependent on the struggling PC market.

Intel on Thursday took the wraps off a new processor code-named Clover Trail. The Atom Z2760 chip is set to launch when Microsoft ships Windows 8 toward the end of October.

The chip is designed to boost battery life and performance for Windows 8 tablets.

The unveiling of the new tablet chip is a big step for Intel, which has dominated the PC market but has yet to compete in the burgeoning tablet market where ARM chips dominate. Tablets have been taking a big chunk out of a PC sales and Intel needs to branch out into other lucrative -- and growing -- markets.

"Intel has so far missed out on the smartphone and tablet boom, and these devices are driving a massive amount of chip volume," said Dan Olds, an analyst with The Gabriel Consulting Group. "Intel needs to have a piece of these high growth and high volume markets in order to remain the dominant player in the chips space over the long haul."

Olds isn't alone in his take on Intel's market position.

On Wednesday, the day before Intel unveiled its new tablet chip, Craig Ellis, an analyst with investment bank Caris & Co., issued a reassessment of Intel, lowering his earnings estimate and stock price target.

Ellis wrote that he made the reassessment because the growing interest in tablets is hurting the PC market and Intel more than he had expected.

Patrick Moorhead, an analyst with Moor Insights & Strategy, said he's not surprised that Intel would be reassessed despite coming out with a tablet chip this week. The company may be working a foot in the door in the tablet market, but it still has to compete with Apple's wildly popular iPad.

Since the iPad, which uses Apple's A5X processor, dominates the tablet market, a smaller percentage of the market remains for Intel's products.

However, by combining Intel's Atom Z2760 chip and Windows 8, more consumers may be lured toward a non-Apple tablet, Moorhead said.

"Clover Trail wasn't ever designed to compete head-on with Apple, but was focused more on a new and growing enterprise tablet market," he added. "With Intel's Clover Trail, enterprise IT would need to be crazy to start deploying iPads."

While it's important for Intel to branch out of the PC market, Moorhead noted that it's too early to declare the demise of laptops and desktops.

"It is vital for Intel to successfully branch out and be successful long term in tablets and phones," he said. "Let's not forget, though, that Intel controls a PC market that isn't going to evaporate overnight, and they power the cloud that drives all those mobile devices. Growth is currently being impacted by people buying a phone or tablet instead of a new PC, but until those devices can replace the PC, people still need them."

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, on Google+ or subscribe to Sharon's RSS feed . Her email address is sgaudin@computerworld.com.

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