Intel chief executive Paul Otellini said in a conference call with analysts today that demand for Ultrabooks is expected to be huge and the thinner laptops could be 40 percent of the consumer laptop market  by the end of the year.

In the earnings call, Otellini said more than 70 Ultrabooks are expected to launch in 2012. Production will ramp up in the second half of the year, and by year end, about 40 percent of all consumer notebook shipments will be Ultrabooks, Otellini said. Intel’s stock is up about 2 percent in after-hours trading.

“I have not seen this level of excitement in our customer base since before Centrino,” Otellini said, referring to the marketing campaign in 2003 that helped demand for laptops with WiFi networking take off. Otellini thinks consumers will be willing to spend more on laptops as they trade up to Ultrabooks, which are thin, have good performance, are secure, and are responsive.

Intel surprised analysts with big numbers for its investments in capital spending (chip factories) and research and development in 2012. Intel plans to spend $12.5 billlion, plus or minus $500 million, on capital spending and $10.1 billion on research and development. Smith said that those spending numbers are relatively high and reflect special investments Intel is making for the year.

Those investment numbers show that, despite the short-term problem of Thailand flooding and the slower expected GDP, Intel is confident about investing in its technological infrastructure. Otellini said the industry is shipping 1 million units a day. Demand will likely be bigger in the second half of 2012, and Ultrabook launches could drive average microprocessor prices higher. Otellini said that the effects of Thai flooding could hit bottom in terms of production problems in January and February. The result would be a refilling of inventory in the first and second quarters, and then larger sales in the second half. The floods have reduced inventory levels, but have not prevented consumers from being able to buy PCs.

“Everyone on earth who wanted to buy a PC was able to buy a PC,” he said.

Otellini said there is a significant blurring of PCs and tablets coming, since many PC makers showed off “convertible” models at CES, where a laptop can be converted into a tablet by rotating the screen. Otellini also said he believes that the launch of Microsoft’s Windows 8 operating system this year will boost PC sales, including Ultrabook sales and Windows 8 tablet sales this year.

Overall, Intel expects sales to grow in the “high single digits” this year, following a record year of $54 billion in sales. Otellini also said that the company’s Data Center Group, which sells microprocessor for servers, saw a “fantastic year” with growth at 17 percent. He noted that China is the largest market for PCs now, with 20 percent of demand.

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