Intel Looks Beyond PCs As Market Shifts

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SAN FRANCISCO (Reuters) – Intel Corp rolled out a software developers’ platform on Tuesday and stressed it will step up efforts to boost revenue from consumer electronics and other markets beyond its core, maturing personal computer business.

Chief Executive Paul Otellini expects personal computer sales volume this year to “likely” at least match 2008’s, underscoring growing expectations that consumer spending is driving a mild recovery for the depressed market.

But with analysts expecting much of the fastest future growth for Intel to come from non-PC arenas, Otellini said on Tuesday that cellphones, software and so-called “embedded” chips would be crucial.

“We’re flushing out the software side,” Otellini told reporters in a briefing. “In these new spaces, in CE (consumer electronics) and in handhelds in particular, and to some extent in netbooks, the Intel side of the world is lacking the viral apps development that you see, say, on the iPhone.”

Investors are looking for double-digit annual revenue growth, but that could be hard to achieve in a mature market, and as computer prices drop over time, said Wedbush Morgan Senior Vice President Patrick Wang.

“If Intel strictly looks at the PC space they’re going to have challenges achieving that type of growth, so they’re thinking about the other high-volume unit cycles besides PCs, like handsets and portable media players,” Wang said.

The potential handset market is huge. Mobile phone unit shipments are expected to hit 1.1 billion in 2009 and be worth $217.2 billion, according to IDC analyst Francisco Jeronimo.

Intel, which in June announced a mobile partnership with Nokia, is targeting small, Internet-connected devices and handsets with an Atom-based platform code-named “Moorestown,” due out in 2010, and another, smaller Atom-based platform code-named “Medfield,” due out in 2011.

INTEL EMBEDDED

Otellini on Tuesday also talked about embedded electronics: microchips in everything from car audio and communications systems to refrigerators that can hoop up to and synchronize with computers and smartphones.

Intel says that market represents a $15 billion opportunity.

Otellini said BMW and Daimler would use a version of its Atom chip for in-vehicle information and entertainment devices beginning 2012.

And the company plans to host a software applications development platform for its lower-end Atom microprocessor, which will allow developers to write programs that work across different devices and operating systems.

Otellini, who said the apps initiative would take more than a year to really get going, said Taiwan’s Acer and Asus, and PC maker Dell Inc, would support the platform. Intel itself has no plans to get into the apps store business.

The company instead will provide the framework for developers to write software that can then be sold through others’ stores.

But some analysts were skeptical, and said software was not Intel’s core competency.

“The jury’s out. The challenge for anyone doing an app store is to get developers to say this is a platform worth developing for, because you’ve got Apple, you’ve got Palm, everybody’s got an app store and software developers only have so much bandwidth,” said Insight 64 analyst Nathan Brookwood.

Intel has made 10 software acquisitions over the past two years, including its most recent, June acquisition of Wind River Systems, a company focused on mobile software.

On Intel’s core business, Otellini seemed to echo industry expectations of a flat to potentially better 2009 compared with last year, when PC sales fell off a cliff.

Otellini said the PC industry remains “alive and well” in the middle of the worst U.S. recession in 70 years, with unit sales seen at flat to slightly higher this year versus last.

Goldman Sachs this month raised its forecast for PC unit sales to “roughly flat,” compared with previous expectations for a 4 percent decline, citing resurgent consumer and government-education spending.