Intel's Q1 boosted by enterprise strength, new products

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Intel, whose chips go in around 80% of the world's PCs, is trying to fend off a growing interest in tablets, a market ruled by rival ARM, which specializes in making the low-powered chips these devices require. PC shipments during the first calendar quarter of this year totaled 80.56 million units, falling by 3.2% year over year, according to IDC. IDC expects tablet shipments to reach 44 million units this year, up from 18 million last year.

But Otellini said the PC market decline on an annual basis is being overstated by the industry research firms. They do not account for sustained PC growth in emerging markets, and the normal growth pattern will become evident through chip shipments from Intel and other chip makers over the year, Otellini said.

PCs are affordable in markets like Latin America, Eastern Europe and China, where computer penetration is low, Smith said. PC makers also cleared out inventory in the fourth quarter and refilled it this quarter, which led to an increase in chip shipments.

"The PC business has evolved into a global industry" that has expanded to 400 million units every year, Otellini said. The company expects double-digit growth in PC shipments for this year. Emerging markets account for more than 50% of Intel's total business.

Otellini said there could be some tablet "cannibalization" of PC sales, but said the company was agile enough to turn the dial to meet demands in the new markets. Intel is investing more in the design and manufacturing of low-power chips to make tangible progress in the tablet and smartphone markets.

Intel earlier this month launched its first Atom chip for tablets, code-named Oak Trail. The company has "good design momentum" around the chip for multiple operating systems, including Meego, Microsoft's Windows and Google's Android, Otellini said. Companies including Lenovo, Samsung and Fujitsu are expected to launch tablets starting in May.

Intel is currently developing the chip code-named Medfield for smartphones, a market in which it has no presence. The company, however, lost volume shipment opportunities for the chip after Nokia decided in February to establish a future smartphone strategy around Microsoft's Windows Phone OS. Windows Phone OS does not work on Intel's chips. Intel is now pursuing other phone makers to adopt Medfield, Otellini said.

"I would be very disappointed if you didn't see Intel-based phones on sale 12 months from now," Otellini said.

Otellini said Intel is trying to scale down power consumption on its Atom chips to match the ARM processors. He also said that Intel has other advantages over ARM going forward, including robust computer architecture, superior graphics, integration of communications and the advanced manufacturing process.

The company currently makes chips using the 32-nanometer process, and will start making chips using the 22-nm process by the end of this year. Intel has said it would match ARM on power consumption by 2013, when it launches tablet chips made using the 22-nm process.

The company projects second-quarter revenue to be around $12.8 billion, plus or minus $500 million.

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Copyright © 2011 IDG Communications, Inc.

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