UPDATE 3-Intel CEO says business more predictable

Wed Feb 25, 2009 7:48pm EST

Related Topics

* Business more predictable in current quarter

* Not sure when downturn will bottom

* Bullish on sales of netbooks using Atom chip (Adds Nvidia comment)

By Janet Kornblum

SAN FRANCISCO, Feb 25 (Reuters) - Intel Corp (INTC.O) is seeing some predictability return to the chip business this quarter but it is still unclear when the downturn will hit bottom, Chief Executive Paul Otellini said on Wednesday.

Otellini's comments at a conference followed a forecast by research firm Gartner that global semiconductor revenue would drop 24 percent to $194.5 billion this year as consumer demand dries up for gadgets like digital cameras and computers.

Despite the recession, Otellini said he remained bullish about sales of netbooks -- the small, low-cost laptop computers used mainly for e-mail, word processing and websurfing. Most netbooks use Intel's Atom chip.

"You're starting to see a pattern of purchases emerge again that's more predictable," Otellini said at the Goldman Sachs Technology and Internet Conference in San Francisco.

"I'm not saying we know where the bottom is or that we've hit bottom (but) the predictability is starting to come back into the system," he said.

"I think you have seen the global shock and now people are starting to figure out how to work out of it," he added.

Earlier on Wednesday, Cisco Systems Inc (CSCO.O) Chief Executive John Chambers told the conference he expected business conditions to begin recovering around the end of 2009.[ID:nN25496665]

NETBOOKS, NVIDIA

Calling netbooks the "only bright spot of growth in the PC industry," Otellini said he expected growing sales, especially during the recession.

Chipsets used in netbooks, which generally cost between $300 and $400, provide a better margin than chipsets Intel sells for low-end notebooks, he said.

"Not only will it appeal to people in emerging markets as first-time machines, it will also offer an alternative to somebody that wouldn't have bought a higher-end laptop even in mature markets," he said of netbooks.

Otellini was also enthusiastic about mobile Internet devices or MIDs, new gadgets that also use Atom chips.

Announcements would likely be made "in the next month or so" from handset manufacturers building new devices using Intel's chips, he said.

Otellini also addressed Intel's legal battle with graphics chipmaker Nvidia Corp (NVDA.O).

Last week, Intel alleged in court that a four-year-old chipset license agreement between Nvidia and Intel did not extend to its next-generation microprocessors.

Nvidia, which makes chipsets that work with Intel's microprocessors under the license, had disputed that, saying its license was valid. [ID:nN18427253]

Otellini called the graphics chipmaker's argument an attempt to "defend the status quo."

"If defending the status quo is honoring our four-year-old contract, then yes, that's correct." responded Nvidia spokesman Bob Sherbin.

Shares of Intel rose 2.4 percent to $13.03 on Nasdaq. (Additional reporting by Anupreeta Das; Editing by Bernard Orr, Ted Kerr and Marguerita Choy)

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