Intel says slowdown won't harm technology

Full speed ahead on new chip design, confirms Otellini

Iain Thomson in San Francisco, vnunet.com 15 Oct 2008

Intel has stated that it is prepared for an economic downturn and will not halt the development of new processors.

The uncertain economic climate will not harm spending on new technology, such as the forthcoming 32nm line of chips, according to Intel chief executive Paul Otellini speaking at a press conference about the firm's third-quarter earnings.

The bulk of the costs of shifting to the new 32nm manufacturing process will come in the first half of next year, but Otellini has no plans to cut funding.

"This is not a dotcom style downturn. That was principally people selling computers cheaply on eBay from companies that melted down," he said.

"Here emerging markets make a difference, as the cost of computing has come down based on growing income levels. Technology will probably do well from a downturn, because we sell the tools of productivity."

Otellini expects the corporate side of the market to be soft as businesses restrict spending on systems, although the Asia/Pacific region is not suffering.

Consumer spending is expected to be light but continued interest in notebooks and netbooks remains strong, according to Intel.

Overall Otellini said that the company is in good shape to weather any financial downturn. Intel has 20,000 fewer staff than at its peak in 2006, and has cash reserves of over $12bn and very little debt.

The company reported another record quarter, pulling in revenues of $10.2bn (£5.84bn) with an operating income of $3.1bn (£1.77bn).

However, Intel made its widest ever range of revenue forecasts for the fourth quarter of between $10.1bn (£5.78bn) and $10.9bn (£6.24bn), reflecting the uncertainty about global markets.

"The range of revenues is broader than we've ever given you before," said Otellini. "That covers all possible situations within the market."

Mobile accounted for 45 per cent of revenues for the company, with strong demand for the Atom range of processors. Demand had outstripped supply in the third quarter but Intel would be able to meet demand by the end of the fourth quarter.

Otellini also commented on AMD's restructuring, claiming that it did not change the fundamentals of the business.

"From my perspective nothing has changed," he said. "You still have someone having to build the capital and build products and sell them to someone else. The food chain hasn't changed; there's just one more person in the chain looking for a profit."

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