It was an optimistic Paul Otellini who took the stage in front of investors and analysts May 12 to talk about Intel’s business.
A month after declaring during Intel’s quarterly earnings announcement that the PC industry had bottomed out, Intel’s president and CEO said business has been exceeding expectations in the first few months of 2009.
“We are halfway through Q2. In terms of our order pattern and our billing pattern, it’s a little better than expected,” Otellini said early in his 45-minute talk.
While June is the key month for the second quarter, he described business as “so far, so good.”
Otellini’s comments came despite the rumors that have circulated over the past few days that the European Union is ready to slam Intel with a hefty fine-possibly in the billions of dollars-for antitrust behaviors as a result of complaints from rival Advanced Micro Devices. That fine could come down as early as May 13.
Throughout the talk, Otellini painted a favorable picture of the state of Intel and the industry, despite the global recession that has hammered most industries.
In the PC business, Otellini said while IDC has predicted that shipment volumes will be down by 9 to 10 percent in 2009, he doesn’t think it will be that bad.
“I’m getting increasingly comfortable that the dip here is not as aggressive as they are showing,” Otellini said.
And while 2009 will the most difficult year in a long time for the PC market, he said he expects that business will return to a normal pace over the next three years, swelling the volume of PCs globally to 400 million units over the next few years.
IDC is also seeing a slowdown in the contraction in the market. In a report issued May 12 before the Intel meeting, the research company said while microprocessor shipments declined in the first quarter at a higher rate than normal, the decline may be slowing.
“The PC processor market continued to reflect significant decline in end demand for most of 1Q09,” IDC analyst Shane Rau said in a statement. “However, some inventory replenishment by OEMs at the end of the quarter helped to slow the decline and bring the quarter in at a level only slightly worse than typical seasonal decline.”
Areas of Opportunity for Intel
During his talk, Otellini also said 45 percent of the 800 million PCs worldwide are three or more years old, which suggests a pent-up demand to refresh those systems. In addition, Microsoft is preparing to release the Windows 7 operating system later in 2009.
There also are a host of other opportunities, in such areas as netbooks, handheld devices, embedded devices and consumer electronics, each of which represents a $10 billion market opportunity, Otellini said.
It’s in the mobile arena that Intel sees the most opportunity, Otellini said. “Mobility is where we think most of the growth is,” he said, pointing to traditional laptops, netbooks and smartphones.
On the server side, he said he is seeing that despite the contraction in IT budgets, businesses are still anxious to buy systems that can save them capital and operating costs, which Otellini said plays into what Intel’s “Nehalem” architecture can offer.
Intel in March rolled out the Xeon 5500 series of chips-code-named Nehalem EP-which are designed to give better performance and energy efficiency at lower costs.
At the high end of the server business, Otellini said sales of Intel’s Itanium chip should continue to grow, particularly as questions arise over the future of Sun Microsystems’ SPARC technology after Oracle buys that company.
Overall, the recession in some ways has been a boon for Intel, Otellini said. While other companies have cut back on spending and innovation, Intel has been able to make use of its strong cash position to continue pursuing its goals.
“While other companies have retrenched … Intel is going to focus on where we think the market is going,” Otellini said.