Intel CEO says Ultrabooks gaining momentum with $699 models coming this fall

Intel chief executive Paul Otellini said that new lightweight laptops known as Ultrabooks are gaining momentum, with more than 140 computer designs in the works at various computer makers.

Otellini said that 40 of the designs use touch interfaces and 12 are convertible between touchscreens and keyboards. He said he is confident we will see $699 Ultrabooks, which are like Apple’s thin MacBook Air laptops, on the market this fall.

Otellini made the remarks in a conference call with analysts. Intel reported better-than-expected second-quarter earnings today, but warned that third-quarter revenue would be lower than what analysts had expected. The slowdown is because Western European and U.S. demand for computers is weak and not recovering as fast as expected, he said.

Intel is the world’s largest chip maker and the largest maker of PC microprocessors, making it a bellwether for the computer industry. The Santa Clara, Calif.-based chip giant has been busy launching its Ivy Bridge hybrid microprocessor-graphics chips that are the heart of Ultrabooks — the thin and fast laptop computers that are the industry’s best attempt to hold off tablet sales.

Otellini said the second quarter saw a “mixed macroeconomic environment,” with slowness among consumers in North America. Emerging countries have spurred a lot of growth in computer sales to date, but in territories such as China and Brazil, the growth is slowing due to currency fluctuations and economic slowdowns.

“Intel did better than most expected, considering information others in the ecosystem were providing,” said Patrick Moorhead, analyst at Moor Insights & Strategy. “Servers, specifically Romley servers, really pulled Intel up, but they also saw slight increases in client products. Q3 could be tough looking into the Windows 8 pre-launch, but Q4 could go very well. New 22nm products rolling deeper into the product line will enable lower-priced Ultrabooks, and new form factor tablets and convertibles have the ability to make a dent in Apple’s iPad.”

Intel now expects full-year revenue growth to be 3 percent to 5 percent, versus a previous prediction of high single-digit growth. Intel is slowing down its spending and may take some older manufacturing offline as a result. Intel also saw softness in NAND flash memory, but its sales of server-based chips were strong, up 14 percent in the quarter.

Intel’s hybrid Ivy Bridge chips, which combine a microprocessor and graphics on a single chip, are now a  quarter of its total volume. That means the launch of the Ivy Bridge chips in the past quarter was the fastest in Intel’s history. That contributed to the Ultrabook shipments achieving first half goals, Otellini said.

Intel’s distribution channel also had the best second quarter in five years, Otellini said. That’s because channel resellers have picked up new skills in servicing and doing systems integration for laptops, servers, and desktops. Five years ago, the resellers mostly distributed desktops.

“The distribution channel has reinvented itself,” Otellini said.

He said he was optmistic because of the upcoming Windows 8 operating system launch from Microsoft, the availability of new Ultrabooks, and new Intel tablets.

Last week, Intel said it would invest $4. 1 billion in ASML, a Dutch chip equipment maker, to further the development of extreme ultraviolet lithography, an advanced manufacturing technique, to enable further miniaturization and speed improvements in the years ahead.

Otellini said the company knows of 20 Windows 8 tablets in the design stages using Intel’s low-power x86 Atom system-on-a-chip technology.

In smartphones, Intel’s Medfield chips were used in the quarter in several new phones from Lava, Orange, and Lenovo. Otellini said he believes Intel’s chips for smartphones will take off in part because consumers will be drawn to high-end systems with the best computing power.