Intel chief says you no longer have to choose between tablets and PCs

Intel chief executive Paul Otellini said that the launch of Windows 8 tablets and hybrid computers means that consumers no longer have to choose between PCs and tablets. That’s the same argument Microsoft has made with the launch of Windows 8 last fall, but it remains to be seen how much consumers are going to buy that argument.

In a conference call with analysts after the company’s fourth-quarter earnings report, Otellini said, “It’s no longer necessary to choose between a PC and a tablet.” Intel’s chips are in convertible computers that you can use as laptops or touchscreen tablets.

Intel posted better-than-expected earnings for the fourth quarter ended Dec. 31, as PC sales weren’t as weak as forecast. Otellini said that demand for Ultrabooks that are 1-inch thick or thinner are up 18-fold over the past year.

Analysts were expecting a consensus of 45 cents a share in the fourth quarter, down 30 percent from 64 cents a share a year ago. Those analysts expected revenue to fall 0.9 percent year-over-year to $13.76 billion for the quarter, compared to $13.89 billion a year ago. Intel posted earnings per share of 48 cents a share and revenues of $13.5 billion. So the earnings were better while revenues matched expectations.

A year ago, Intel wasn’t shipping any chips into x86-based tablet computers. Now it has 10 shipping designs, and more are in the works. And Intel’s chips are in seven smartphone devices. Those moves are part of Intel’s attempt to diversify beyond the PC.

But the PC isn’t falling apart. Otellini noted that Intel is generating $1 billion in net income a month. Much of that growth is due to good sales of server chips, which range from small Atom chips for micro-servers to 60-core Knights Corner chips for supercomputers.

Intel’s earnings are closely watched as a bellwether for the computer industry’s health, as well as the overall tech industry. But like Microsoft, Intel is heavily weighted on chips for PCs, even as market demand shifts to smartphones and tablets. While those latter sectors are growing, PCs are believed to have fallen 5 percent in unit sales in the fourth quarter, according to market research firm Gartner.

Intel is shifting to meet mobile-device demand. It has created laptop chips that dissipate as little as 7 watts, and its code-named Haswell processor coming mid-year is expected to be even better at power consumption. At the Consumer Electronics Show in Las Vegas, Intel said it was working with seven major vendors of smartphones who have launched Intel-based devices in 25 countries. But the revenue from those deals is a drop in the bucket compared to the revenues Intel gets from the PC chip business.

In the past four quarters, Intel’s revenue has been mixed. It fell 5.5 percent in the third quarter, rose 3.6 percent in the second quarter, was flat at 0.5 percent in the first quarter and soared 21.2 percent in the fourth quarter a year ago. Net income fell in each of the last three quarters. In third quarter, net income fell 14.3 percent from the year earlier. Second quarter net income was down 4.3 percent, and first quarter earnings were down 13.4 percent.

Otellini has put a lot of stock in Intel’s upcoming code-named Haswell mobile processor, which will deliver the “largest generation to generation improvement in battery life in Intel history.” The chips will use Intel’s 22-nanometer manufacturing and Tri-Gate 3D transistors. By year end, Intel believes it will start shipping the next-generation 14-nanometer chips, which will be smaller, faster, and cheaper than the previous 22-nanometer generation.