Intel ‘Very Optimistic’ On Supplying Chips For Tablet PCs, CEO Says

The tablet computer market is still “in the early stages,” with few products other than Apple’s iPad “shipping in volume,” but Intel is “very optimistic” about participating in the category, CEO Paul Otellini said on an earnings call Tuesday. It’s “an additive category to the market, much like” netbooks, which “had a higher potential to cannibalize” PC sales but “didn’t,” Otellini said.

There were “over 30 varieties of tablets shown” using Intel’s Atom processors at Computex last month, said Otellini. The advantage of using Intel’s chips “in this segment is you can run a number of operating systems,” he said. “You can run Windows. You can run Android. You can run Chrome. And you can run MeeGo or the other versions of Linux. So, we feel pretty good about our opportunity to participate in the growth as it happens."

Intel reported strong results for Q2 ended June 26. It posted a $2.9 billion profit, 51 cents per share, reversing the $398 million loss, 7 cents, a year earlier. Revenue jumped 34 percent to $10.8 billion. “Strong demand from corporate customers for our most advanced microprocessors helped Intel achieve the best quarter in the company’s 42-year history,” said Otellini. Intel’s business in all regions beat “seasonal norms,” Otellini said. China “was a little slow going early in the quarter, and it got good towards the end,” he said. The situation was “similar in Europe,” where “we had the volcano in the beginning” of Q2 “and some currency disturbances and volatility in the middle, and things settled down in both geographies by the end of the quarter,” he said.

"A number of companies are now moving towards production on Atom-based” TVs, set-top boxes, DVD players and other products, Otellini said. “To me, that is one of the bigger things to watch for the holiday season as those products break market. … Since launching the Atom processor two years ago,” Intel has shipped about 75 million of them, and “we still expect the industry to ship around 40 million netbooks this year. Many third-party analysts are now projecting annual growth of around 20 percent” for global PC sales, and Intel’s “plans are consistent with this number,” he said. “For the last five quarters, we have seen PC sales, driven by consumer purchases, particularly notebooks,” and that “trend is continuing.” In Q2, Intel “saw a return of corporate purchases that offset seasonal and geographic patterns in the consumer segment,” he said.

Intel’s “outlook for the year remains robust,” Otellini said. “Across the supply chain, we are very comfortable with the levels of inventory. In the channel, we saw a marked decline in inventories as currency volatility caused distributors to cut back on orders so inventories in the channel are very lean."

The company expects to report “a record annual gross margin” for 2010, “with the midpoint of our annual forecast increasing from 64 percent to 66 percent,” said Chief Financial Officer Stacy Smith. “The strength of our product portfolio and our cost structure will allow us to achieve our most profitable year ever,” he said. For Q3, Intel expects to report revenue of $11.6 billion, “plus or minus $400 million,” it said.