Intel's Otellini Promises More Innovation, Lower Costs

Otellini painted a picture of a company that has fully recovered from its slump of a year ago and is now firing on all cylinders.
Intel Chief Executive Paul Otellini on Thursday said his company plans to take its processors into every segment of the computer market, from servers to consumer electronics, while driving down costs.

In addressing Intel's Spring Analyst Meeting in New York, Otellini and Intel executives painted a picture of a company that has fully recovered from its slump of a year ago and is now firing on all cylinders. The engine behind the company's product improvements is its switch to a 45-nm manufacturing process from a 65-nm process. The move is expected to boost processor performance, while driving down chip size and manufacturing costs. At the same time, energy consumption won't increase.

"This is very much foot to the floor in terms of technology and performance," Sean Maloney, executive VP and general manager of sales and marketing for Intel, told analysts.

Otellini said the company is on target to cut expenses by $2 billion this year, and $1 billion more next year. Andy Bryant, executive VP and chief financial officer, later said he didn't know where he would find the additional cost savings, but was confident the 2008 goal could be reached. Otellini said headcount would be reduced, but didn't say how many jobs could be cut. Intel has already reduced the number of jobs at the company in the last six months to 92,000 from 103,000.

This year and next, Otellini expects profit growth to outpace revenue growth. "While we will have revenue growth this year, I would expect that our bottom line growth will grow faster in 2007 and 2008 than our top line growth," Otellini said.

Among the technology segments that Intel sees as providing the biggest sales opportunities is the continued market shift from desktop PCs to notebooks. By 2009, Intel expects notebooks shipments to surpass desktops. Market researcher IDC has forecast that milestone for 2011. In attacking that market, Intel plans to launch its next-generation Centrino processor, codenamed Santa Rosa, on May 9.

While desktops and servers are expected to continue to contribute heavily to Intel's chip revenues, Otellini said the company also is gearing up for new processors in emerging markets, particularly mobile Internet devices, ultra-mobile PCs, and consumer electronics that are Internet enabled. Systems using Intel's 2007 MID and UMPC platform, codenamed McCaslin, are scheduled to ship this summer. In the first half of 2008, the company will ship a 45-nm version, codenamed Menlow.

Otellini also said Intel was very much focused on emerging markets, countries in Asia, Eastern Europe, and other regions where a tech-hungry middle class is forming. For those markets, which are particularly price sensitive, Intel plans to introduce a low-cost 45-nm chip, codenamed Silverthorne, next year.

"The company is executing extremely well," Otellini said. "We are investing now for continued, profitable growth in markets today and tomorrow."