Intel Bullish On Sales, EPS Growth At Investor Meeting
Intel anticipates double digit growth in revenue and earnings per share (EPS) over the next few years and predicts it will be shipping a billion units of Intel product per year within the next five years, the chip giant told investors Tuesday.
"I think weve set ourselves up for very profitable growth in the coming years," said Intel CEO Paul Otellini, opening the company's annual Investor Meeting at its Santa Clara, Calif. headquarters.
The Intel chief addressed one hot topic head on -- the growth potential for tablet PCs in the wake of Apple's initial success with its iPad. Otellini downplayed the challenge posed by tablets -- many, like the iPad, powered by ARM-based processors -- to Intel's low-power Atom chips which dominate netbooks.
"Everybody says tablets are going to eat the notebooks' and netbooks' lunch," he said. But Otellini pooh-poohed the tablet category as "relatively insignificant."
He said that tablets, like netbooks, were "additive" devices that didn't challenge full-featured PCs and that at any rate, the product category would "probably be good for Intel, long-term."
Otellini said Intel saw strong growth opportunities in emerging markets and particularly in the BRIC countries of Brazil, Russia, India and China. He said the Internet is still the driver of growth in computer sales as more citizens of those countries go online for the first time to network and watch video, even as Americans get blase about this because Internet use in the U.S. is already so widespread.
The fastest-growing online activity is video, Otellini told Intel investors, so the company is particularly interested in building best-in-class HD video technology into its current and future processors and hardware platforms.
"What do people do on the Internet? Well, today most of it is video. Tomorrow, most of it will be video," he said. "Video is driving Internet traffic growth. This is important when you consider how you want to design your future products."
Intel was bullish about a surge in demand for its products from business customers following a recessionary period that saw upwards of a million servers delayed in their normal refresh cycle by a year.
Some 76 percent of Intels server install base is due for a refresh, according to Tom Kilroy, senior vice president of Intels Sales and Marketing Group, one of several executives who followed Otellinis opening keynote with deeper dives into product categories and market segments at the Investor Meeting.
In addition to servers, Kilroy said that replacing aging business notebook fleets was "top of mind" with CIOs at enterprise organizations as the economic recovery strengthened.
While the recovery promised bright days ahead for Intel's hardware products, Otellini said Intel was not content with being just a semiconductor manufacturer and is transitioning from "a computer chip company to a computing solutions provider."
Some 22 percent of non-manufacturing employees work in software, he said, adding that "it's a big and growing part of our company and I would expect it will grow as a percentage of our headcount in the coming years."
Next: Smarts And The Computing Continuum
Otellini said that expanding its reach in software and services would help Intel enable the next generation of smart computing and position the company to "create a computing continuum around the Intel Architecture" in products ranging from servers to embedded electronics to "smart TVs."
"What does a microprocessor do? It makes something smart. It enhances the capability of the device its in," he said, sketching out the history of Intel chips that made computers "smarter." He promised that Intel "will do exactly the same thing in a number of other industries, whether its a tablet, GPS system, smartphones -- theyll get smarter."
"TVs, starting this year, will get smart. The television revolution were about to go through will be the biggest change since we moved to color," Otellini said, talking up Intel Wireless Display (WiDi) technology recently released on the market that allows users to connect their notebooks to HDTVs and computer displays without any cables.
The Intel chief said the transformation of television or any popular technology for that matter was "not just a silicon play anymore" but required close work with developers, content producers and others to ensure "all the layers" of the technology were integrated and growing at the same pace.
"Its a lot of work to do this," Otellini said. "To transform an industry takes a lot more than just a chip these days. You have to have all the layers. Anybody who wants to compete with us must also have all the layers."
The chip giant's investments in technologies and service capabilities to add to its manufacturing capabilities made the company "one of the fundamental computing companies in the industry" and one that was "increasingly differentiated and unique."
Otellini also addressed some bread-and-butter issues for Intel. He said the global desktop PC market was growing at a 2.4 percent clip -- "nothing to write home about." The real growth categories in client PCs for Intel were notebooks and netbooks, which would help the overall market for PC computers to grow 15 to 16 percent from 2010 to 2014.
Answering a long-standing question about Intels line of low-power Atom processors for netbooks, Otellini said there was little evidence that the cheaper mobile PCs were "cannibalizing" full-featured notebook sales.
Netbooks are "playing out as 'another computer,'" added Kilroy, who said just 5 percent of netbooks were being purchased to replace a notebook, per Intels research. Some 7 percent of netbook purchases were by first-time computer buyers, while the remaining 88 percent were used as complementary devices to more powerful mobile PCs.