Intel hits record profits, bets heavily on Ultrabooks

January 20, 2012 // 9:51 a.m.

Tags: #android #atom #earnings-call #intel #ivy-bridge #paul-otellini #profits #research-and-development #ultrabooks

Intel chief executive and president Paul Otellini has given his company's investors plenty to smile about in his latest earnings announcement, boasting 24 per cent revenue growth while profit grew 13 per cent for the year to a whopping $12.9 billion

'2011 was an exceptional year for Intel,' boasted Otellini during his regular earnings call with analysts and investors. 'With outstanding execution the company performed superbly, growing revenue by more than $10 billion and eclipsing all annual revenue and earnings records. With a tremendous product and technology pipeline for 2012, we're excited about the global growth opportunities presented by Ultrabook systems, the data center, security, and the introduction of Intel-powered smartphones and tablets.'

Otellini's comments offer a clear indication of where his company is looking to grow, and later explanations helped to cement these areas in investors' minds: slim and light Ultrabooks will likely grow to around 40 per cent of the consumer laptop market by the end of 2012, Otellini claimed, stating that 'I have not seen this level of excitement in our customer base since before Centrino.'

For smartphones and tablets, which are to be powered by Intel's newly-launched Atom Z2460 system-on-chip platform, Otellini is betting the farm on Google: 'The thing is,' he explained during the call, 'tablets are a little bit about hardware and an awful lot about software - and I think that, until you get to Ice Cream Sandwich, the offering isn't as powerful as what's out there with Apple.

'As Ice Cream Sandwich tablets start shipping, I think you'll start seeing a little bit better receptivity. You know, Google just added the Music Store, the videos are better, everything got a little bit better with ICS,
' Otellini explained, 'and so I think the better test is year two here, in terms of is there anybody who can compete with the iPad. The other part of that test, of course, is the Windows 8 tablets that are being queued up for production.'

In this area, however, Intel is likely to hit stiff competition: rival chip design giant ARM is already boasting design wins across the overwhelming majority of smartphones and tablets, and with Microsoft adding support for the ARM instruction set architecture to Windows 8 Intel is going to have a fight on its hands to convince OEMs and ODMs to opt for the x86-based Atom in place of the old familiar ARM chips.

Boasting a 'tremendous product and technology pipeline' for the future, Otellini announced that Intel will be spending $10.1 billion on research and development projects in 2012 but declined to explain precisely where that money will go; given his earlier comments, however, we're willing to bet a three-way split between the PC Client Group, the Data Centre Group, and the 'Other Intel Architecture Group' responsible for products that don't fit either of the aforementioned categories.

Looking at the figures for the year, it's easy to see where Intel is making its bumper profits: to the year ending December 31st 2011, the PC Client Group - responsible for the desktop and laptop chips we know and love - made an operating income of $14.8 billion, while the Data Centre Group - the outfit behind the Xeon and Itanium chips, networking hardware and projects like the Many Integrated Cores (MIC) accelerator boards - made $5.1 billion.

The news wasn't so good in other areas, with the Software and Services Group representing a loss of $32 million while the 'Other Intel Architecture Group' dropped the ball with a $577 million loss; a serious slip from last year's $270 million net income.

With the worst of the hard drive shortages - caused by flooding in Thailand, which forced several manufacturers to shut down production facilities - now over, Otellini seems confident that Intel will be breaking financial records again next year; and if the new Atom family performs as well as early indications show, he could be on to something.

Are you disappointed that Otellini's earnings call didn't spend any time focusing on Ivy Bridge and other desktop-oriented products, or just pleased to see the company investing plenty of cash in its research and development arm? Share your thoughts over in the forums.
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