Intel a 'Solid, Executing Machine,' CEO Assures Investors

SANTA CLARA, Calif. — Amid rising competition and a softening semiconductor market, Intel Corp. CEO Paul Otellini on Wednesday sought to reassure investors and others that his company is still poised for growth and primed for innovation.

"We are on track, we're a solid, executing machine and I think we're extending our lead over many, many products," Otellini told Wall Street analysts and reporters at an investors meeting at Intel's headquarters here.

Intel, the world's biggest maker of computer processors, is an important bellwether for technology stocks and the high-tech industry in general. Its shares are widely held, and its chips are the electronic "brains" of most personal computers and many other electronics.

Otellini's comments came two days after Intel rattled stock markets when it disclosed its quarterly profit margin would be lower than expected because of declining prices for some flash memory chips.

Wednesday, he gave more detail, saying prices for so-called NAND flash memory have fallen much more quickly than expected. But, Otellini added, the company is addressing the problem.

"This business will not be a drag on Intel Corporation," he said. "We're going to fix it or we're going to make sure it's profitable in one way or another."

Intel also could be facing renewed competition from archrival Advanced Micro Devices Inc., which says it is catching up to Intel technologically faster than it previously expected.

AMD, which designs chips and has much of its headquarters operations in Austin, Texas, said this week it would begin shifting from 65-nanometer manufacturing technology to 45-nanometer by the end of this year. The technology significantly reduces the size and increases the power of microprocessors.

Intel introduced its first 45-nanometer chips late last year. Industry analysts previously predicted AMD was as far as two years behind.

Either way, AMD has a very long way to go to catch up with Intel. Wednesday, Otellini announced that Intel has shipped its 4 millionth 45-nanometer chip, and said plans to significantly expand its lineup of 45-nanometer chips in the next several months is well on track.

Along with stepped-up competition from AMD, Intel is facing an expected slowdown in semiconductor sales after several years of strong growth.

Earlier this week, the Semiconductor Industry Association said that worldwide semiconductor sales in January were down almost 4 percent from December, and predicted that the slowing U.S. economy may hurt future sales.

"The U.S. economy has entered a period of slower growth that may impact consumer purchases of electronic products," association president George Scalise said in a statement. "However, the emergence and growth of large consumer markets outside the U.S. has created new opportunities for chipmakers."

Intel executive vice president Sean Maloney made a point of showing how the company's business is less dependent on North American markets than it used to be.

Ten years ago, Maloney said, Intel got about 44 percent of its business from North America. Today, he said, it's closer to 24 percent.

Even if a semiconductor slowdown worsens, Otellini said Intel is well positioned because of its investments and emphasis in new areas.

Among them, he said, is Intel's push into so-called "Mobile Internet Devices" — tiny but full-featured computers — and "embedded" computing devices designed to connect appliances or other electronics to the Internet.

"When you add up all those markets that are addressable by Intel architecture ... we think we can triple the market for our products," he said.

Still, Otellini said, Intel's bread-and-butter business of supplying personal computer makers is growing as well, especially in the notebook and laptop PC business.

"The PC industry looks to be very, very solid with low double-digit growth rates throughout the horizon period," he said.