Intel CEO Sees Better Than Expected PC Sales

Paul Otellini tells investors that in the second half of the year, the company is expecting the market to return to normalcy.

Intel CEO Paul Otellini

Photo by Kun Ger/Zuma Press/Newscom

Intel chief executive Paul Otellini on Tuesday said PC sales so far in the second quarter of this year are "a little better than expected" and predicted that the market would stabilize in the second half of the year.

Otellini, who made headlines in April when he said PC sales appeared to have "bottomed out" in the first quarter, told financial analysts and reporters that the market appears to be improving.

"What we've seen so far is a little better than expected," Otellini told the gathering at the company's annual investor meeting. However, the real test of how the PC industry is doing will come in June, when chip sales typically pick up as computer makers get ready for the back-to-school season.

"With that caveat, what I can say is so far so good," Otellini said of the current quarter.

Intel, which accounts for more than 77% of the PC microprocessor market, is considered a bellwether for the computer industry. Otellini said that in the second half of the year, the company expects the market to return to normalcy "albeit at a lower base (than prerecession sales levels)."

While overall PC sales would be less than before the economic downturn, Otellini did not see the market falling this year as far as Gartner's projection of a nearly 12% decline from 2008. "I'm getting increasingly comfortable that the dip is not as aggressive as they're saying," Otellini said. "I think as the year sorts out, this number may not be as bad."

Otellini also discussed Intel's product strategy over the next few years, but offered little that was new. Besides its core business of providing chips for desktops, laptops, and business servers, the company is focused on driving its low-cost, low-power Atom processor from netbooks into smaller handheld devices. Atom is primarily used today in netbooks, which are mini-laptops optimized for Web browsing and other basic tasks.

Intel is not a player in the smartphone chip market, which the company believes will be worth $10 billion in 2011. Intel expects the next-generation Atom processors, which will be 32-nanometer chips, to provide the performance, low-power, and size requirements of the smartphone market. Intel has said it plans to start producing 32-nm processors in volume for computer makers in the fourth quarter of this year. However, it's not clear when the new Atom chips will be available.

Nevertheless, Otellini made it clear that Intel wants to be a major supplier to smartphone makers. "This is the market that we're targeting," Otellini said. "We're not targeting the low-end phones, at least initially."

Companies that make processors today for the smartphone market include ARM, Marvell Technology, and Samsung.

Another new market targeted by Intel is consumer electronics, particularly set-top boxes connected to the Internet to bring online video to the home television. "All consumer electronic devices will connect to the Internet in our opinion," Otellini said. "That's the source of all content going forward."

Intel plans to target upcoming 32-nm systems-on-chip for that market, as well as the handheld market.

One market that appears to be dying, but isn't dead yet, is desktops, which have been surpassed by laptops in terms of sales. More than 800 million desktops are currently in use, and 45% are more than three years old, Otellini said. As a result there's a pent-up demand for replacement systems, as well as an opportunity to sell laptops to people who want to switch.

Nevertheless, desktops are changing in terms of style and size. "The old boring beige desktop that we all grew up with is about dead," Otellini said.

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