News

Intel Addresses Down Market with Talk of $200 Notebooks

• By Kurt Mackie
• 04/18/2013

Intel this week reported earnings results for its fiscal first-quarter totaling $12.6 billion, while also fending off questions from financial analysts.

Net income was $2 billion for the quarter, which was down 17% from Q4 2012. The Intel PC Client Group was down 6% year over year on $8 billion in revenue, but the Intel Data Center Group was up 7.5% year over year on $2.6 billion in revenue. During the earnings call, Intel executives played up the datacenter business while looking to the future with Intel's Haswell chip, scheduled for arrival in the second half of this year. The company is also transitioning to 14-nanometer technology this year and expects to get it a financial boost from it.

The earnings call was the last one for Paul Otellini, Intel president and CEO, who was the company's fifth CEO. Otellini will retire next month, and his replacement will be announced at the Intel shareholder meeting in May, according to the earnings call.

A few product roadmap details were announced. The Atom "Avoton" system-on-chip will be shipping in the second half of this year. The "Bay Trail" processor is slated to launch in in the second half of this year. The Atom "Merrifield" processor will be seen by end of this year.

It's the Bay Trail processor that promises to perhaps change the dismal device outlook that has been clouded by recent reports of a massive decline in PC shipments. Otellini hinted about dramatic price decreases that will be enabled by Bay Trail in future touch-based notebooks.

"As the OEMs start looking at new form factors that they can design around our new chips -- Haswell, in particular, and maybe Bay Trail and Windows 8 enabling touch -- the explosion in form factors and the competitiveness of that platform is going to be substantially different, at price points down into the $300 to $400 dollar range, enabling touch. You didn't have that last year," Otellini said during the earnings call.

A financial analyst later challenged the Intel executives, based on Intel's past price projections. He said that Intel had previously described touch-enabled notebooks as being priced between $599 and $799, and noted that Intel was now projecting "quite a bit lower" prices with Bay Trail. Otellini explained that it was necessary to separate ultrabooks from touch-enabled notebooks. He said that future touch-enabled notebooks will be down to $200.

Otellini also was bullish on Intel's Haswell, a more powerful chip that is expected to reduce power consumption to better support mobile device scenarios.

"With Haswell, there is a number of things," Otellini said. "First of all, the overall performance goes up -- graphics performance goes up as well as the integer performance, so, it's a better punch in the package than we've had with Ivy Bridge. Point One. Point Two, the power envelope or the battery life for that level of performance is exceptionally better than Ivy Bridge. Third, it gets into the form factor innovation and the integration of touch that I spoke about earlier, which I think is really part of the recipe for Windows 8 adoption."

When asked how Haswell can turn around sluggish Windows 8 adoption, Otellini was upbeat about Microsoft's operating system and about device demand being driven by touch.

"I've recently converted personally to Windows 8 with touch and it is a better Windows than Window 7 on the Desktop mode when you implement the touch and the touch-based applications and operating environment. It's just a lot easier to use," Otellini said. "There is an adoption curve, and once you get over that adoption curve, I don't think you go back. We didn't quite have that same kind of adoption curve in Windows 7 vs. XP before it. This requires a little bit of training. And I think people are attracted to touch, and the touch price points today are still fairly high, and they're coming down very rapidly over the next coming quarters."

Intel executives said that the netbooks segment of low-cost laptops was coming to an end. The arrival of different form factors and mobile devices would prove to be a boost since half of all spending is on system-on-chip devices such as ultramobiles, phones and tablets. There will be market reinvention on notebooks, which represent about a third of the market. Intel also was looking to profit from cloud computing and the high-performance computing segments.