Intel: Economy hurts but there are bright spots

Intel, like so many other tech companies, is feeling the pinch of the economy. And Paul Otellini, President and CEO of the chip maker, isn't trying to deny it.

Intel, like so many other tech companies, is feeling the pinch of the economy. And Paul Otellini, President and CEO of the chip maker, isn't trying to deny it. But at the Goldman Sachs Technology conference in San Francisco this week, Otellini said there are some factors that are working in Intel's favor and will not only allow the company to ride the economic storm but will position it to be a leader when the economy eventually recovers.

Also see: Intel: The industry is ‘resetting;’ Quarter weak; Inventory swells

One of the reasons has to do with the PC market. Personal computers have become essential products, Otellini said. The purchases are no longer discretionary - if you need a computer, you buy a computer. You don't necessarily wait for the economy to recover. That's good news for Intel.

What's also good news for Intel is the shift from desktop PC to the laptop PC. The upgrade cycle  happens more frequently, he said. People lose laptops. People drop laptops. And laptops have a fashion element tied to the upgrade cycle, as well.

And finally, the expected growth of netbooks - which use Intel's Atom chip - will be helpful, as well. Otellini, who doesn't see netbooks cannibalizing notebooks, said the growth of netbooks will take off in a similar way that cell phones are now sold - subsidized by the service provider and tied to a contract to get them in hands of users. His best guess is that one-third of the volume will move that way this year and that it will grow to one-half next year.

Also see: Intel: Netbooks incremental to notebooks for now

For Intel, all of this equates to sales - even in a rough economy.

Otellini - who said that life as Intel's CEO since he joined the company in May 2005 "certainly has been no honeymoon" - pointed to competitive issues and changing markets over the last couple of years. The company, he said, did some restructuring and was starting to see some success in early part of 2008 - and then the economy came crashing down.

Also see: Intel restructures manufacturing ops; 5,000 to 6,000 workers hit