Intel bullish on PCs, targets Intel-inside smartphone for 2012

May 18, 2011: 3:40 PM ET

While Intel chips power the servers that power the tablet and smartphone revolution, CEO Paul Otellini recognizes that's not enough.

Steve Jobs presented Intel CEO Paul Otellini w...

Intel CEO Paul Otellini (r) with Apple CEO Steve Jobs. Image via Wikipedia

Despite all the hullabaloo over a post-PC era, Intel chief executive officer Paul Otellini remains bullish on the traditional personal computing market.

At the chipmaker's annual investor meeting held earlier this week in Santa Clara, Calif., Otellini said Intel (INTC) will reinvent PCs, which will soon have features like all-day battery life, a touch interface and instant-on capabilities (a la tablets). According to Otellini, IntelĀ  is hard at work at developing the lower-wattage processors that will enable this new breed of PCs.

"The most exciting thing we'll be talking about today is redefining the consumer PC experience," the CEO told an auditorium full of investors.

But while PC processors remain Intel's biggest moneymaker, the company is often criticized for being unfashionably late (okay, a no-show) to the fast-growing smartphone and tablet market. It has promised Intel-powered mobile phones for several years now, but so far none have hit the market. And while it's a bit farther along on its tablet roadmap (an Intel-running tablet is expected to launch later this month), it's yet to prove it can play catch-up to ARM-powered tablets like Apple's (AAPL) iPad. At Tuesday's investor meeting, Otellini admitted that the lack of a more clearly defined mobile roadmap would disappoint some in the room.

Intel's master plan is to extend its "silicon leadership" across all product categories -- from high-power server processors to lower-wattage chips that go into mobile phones and tablets. But so far, it hasn't been able to execute on this vision. The first smartphones running Intel processors won't begin shipping until 2012. And even after they become available, it's not clear if Intel's mobile chips will have any advantage over technology licensed by British chip designer ARM Holdings (ARMH), which dominates mobile devices.

In the meantime, the company says it's already making more money from the proliferation of mobile devices than any other silicon vendors. How? By selling server processors. According to Intel, one server is needed for every 600 smartphones in use. That demand will help grow Intel's data center sales to $10 billion this year. Within five years, Intel expects this number to double to $20 billion.

And then there's the PC market. Despite recent reports of a slump in PC sales from both Dell (DELL) and Hewlett-Packard (HPQ), Intel maintains that demand from China and emerging markets and the shift from desktop to notebook is helping to fuel demand for its $30 billion PC processors business.

Of course, if a post-PC era is really upon us (as Apple's Steve Jobs likes to point out), then the growth Intel is seeing in PCs will soon wane. And while Intel's server business does profit from the proliferation of any mobile devices, even Otellini admits that's not going to move the needle over the long-term.

"The money is in the infrastructure," CEO Otellini told investors on Tuesday. "But that isn't enough for us."

Join the Conversation
About This Author
Michal Lev-Ram
Michal Lev-Ram
Writer, Fortune

Based in Silicon Valley, Michal Lev-Ram covers enterprise and mobile technologies for FORTUNE. Prior to joining FORTUNE, she wrote for CNNMoney, Fast Company, Popular Science and other business and technology publications. She was also a staff writer at Business 2.0 and holds a B.A. in journalism from San Francisco State University.

Email Michal
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.