Intel chieftain outlines broad tablet, smartphone blitz
Blames Android for iOS success, touts Win8 slabs 'in the queue'
Intel CEO Paul Otellini sees his company moving into all levels of the tablet and handset markets, from Android and Windows 8 fondleslabs to smartphones, feature phones, and what he dubbed "value phones".
"Our intention is to participate broadly in all three of those markets," said Otellini, referring to handsets, tablets, and Intel's bread-and-butter PC and server business. He made his comments when speaking with reporters and analysts after Intel released its record-breaking financial results on Thursday.
One questioner asked Otellini if Intel planned to offer as broad a range of products in the tablet and handset markets as it does in its PC and server microprocessor business, which ranges from Atom to Core to Xeon to Itanium, with stops along the way to revisit Celeron and Pentium.
"In tablets, I think we'll be able to do that from day one," he said, "as you see the Android tablets coming out, and Windows 8 tablets coming out. You'll see us well-positioned at multiple price points on those."
Otellini admitted that he had no idea where prices for those parts would settle over time, but said that Intel's intention is "to drive the bill of materials cost down and the integration up in the tablet space, which I think is going to be a sweet spot for Intel."
Handset plans: top to bottom
Intel's phone strategy, however, won't start out at a broad range of parts and price points. "We're coming in at the top of the smartphone market," Otellini said, promising a focus on performance, features, and what he characterized as "very good" battery life.
Intel's ability to swim in the vast sea of feature phones and value phones, Otellini said, is bolstered by its $1.4 acquisition of the Wireless Solutions Business of Infineon Technologies AG, announced in August 2010.
"The Infineon acquisition has given us a very strong position in basic phones and feature phones," Otellini said. "You know, they shipped 400 million modems this year into the cell-phone business."
But Chipzilla won't be content to merely milk that cash cow for its multimillion-modem revenue stream. Instead, the company plans to eventually meld Infineon and Intel technology into one-chip SoCs. "Over time," Otellini said, "what we will want to do is grow that capability up by integrating the apps processor and the comms processor onto the same chip while we drive our initial positions in apps processors from the top down."
He took great pains, however, to let his Wall Street audience know not to expect such integration any time soon. "I did not say – I want to be very clear – I did not say that our intent would be to integrate Medfield to baseband," he said, referring to the chip that is, for example, powering the first Intel smartphones, the Huawei Ascend PS line.
"I said [that] over time you'll see us move from the low-end, baseband-only business in the feature phones and value phones to having a more-integrated capability," Otellini reiterated. "I didn't say when and in what generation, and I'm really not at liberty to discuss that. The major thrust over the next year or two is going to be to have very high performance modems as a comms processor, and the best-of-class apps processors for smartphones."
'Now, about those fondleslabs'
Tablets are another matter entirely. When asked if he was disapointed by the sales figures of Android-based tablets when compared with the stranglehold that Apple has on the fondleslab market, he defended his projections versus those of the analyst community. "Actually, [sales] were about where I thought they would be," he said. "I was well below what many of you had."
In Otellini's opinion, it was Android itself that hampered non-Apple tablet sales. "Tablets are a little bit about hardware and an awful lot about software," he said. "And I think that until you get to Ice Cream Sandwich, the offering isn't as powerful as what's out there with Apple."
iOS's advantage will fade, he believes. "As Ice Cream Sandwich tablets start shipping, you'll start seeing a little bit better receptivity," he opined. "Google has added to Music Store, videos are better – everything got a little bit better with ICS."
Ice Cream Sandwich may be all well and good, but according to Otellini "The better test is year two, here, in terms of 'Is there anyone who can compete with the iPad?' And the other part of that test, of course, is the Windows 8 tablets that are being queued up for production."
In addition, Intel's CEO believes that there's a lot of room for innovation in mobile form factors. "I don't know that the whole tablet thing is settled down by any stretch," he said, "and I do have a lot of interest – if you heard me at CES – about these hybrid convertible designs as they apply to clamshells, where there's a significant blurring between what people do with tablets and what people do with PCs."
Tablets may be all the rage today, but according to Otellini, "The jury is out on the long-term segmentation by form factor." ®
Intel CFO Stacy Smith, sharing the call with Otellini, fielded questions from Wall Streeters concerned that Intel's capital expenditures might be a wee bit high: $10.7bn in 2011, with $12.5bn (plus or minus $400m) planned for 2012. "You're going to ask if Paul and I are going to continue to spend like drunken sailors or not?" he replied to one questioner. Smith did, however, add that 2012 was an "investment year," and that such high capex outlays would come down "over time."
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