CEO Otellini Says Intel Will Be Major Player In Tablet Market

Intel is going to pursue the burgeoning tablet market aggressively, despite concerns from some industry observers that the giant chip-maker is not doing enough in that space.

During a conference call to announce Intel’s third-quarter financial results, CEO Paul Otellini praised Apple for reinvigorating the tablet market with the release of its iPad tablet. He said he also recognised the growth potential of the tablet market, which is seeing a host of vendors, from Dell and Hewlett-Packard to Research In Motion, Cisco Systems and Asus, jumping in to claim their share.

A Change In Tone

It was a change in tone for Otellini, who in the past had referred to tablets as “additive” to the overall notebook market. He now said the tablet market is an important one for Intel, adding that the company will eventually dominate the space on the basis of its Atom processor platform.

“We will use all of the assets at our disposal to win this segment,” Otellini said. “We expect to participate fully and broadly in this market.”

Over the next few quarters there will be a host of new tablets coming to market powered by Atom and running the Windows, Android and MeeGo operating systems, he said, making Intel the only hardware maker to support three of the top four operating systems, Apple’s iOS being the only exception.

“The big question on everyone’s mind is how Intel will respond to new computing categories where Intel currently has no presence, specifically tablets,” Otellini said during the call. “We think tablets are exciting and fully welcome their arrival. Apple has done a wonderful job re-inventing the category. Will they impact PC sales? Sure, at the margin they probably will.”

He pointed out that  Oak Trail, Intel’s upcoming system-on-a-chip (SoC), is designed specifically for tablets and thin netbooks which should begin appearing on the market in 2011. Intel officials showed off Oak Trail at the Computex show in June and demonstrated it during the Intel Developer Forum (IDF) in September.

On the showroom floor at IDF, Intel showed off a number of tablets that were powered by Atom, with most of them running the MeeGo mobile OS developed by Intel and Nokia. During a keynote speech, Dell officials also unveiled their upcoming Atom-based seven-inch tablet, and Intel showed off the WeTab, an 11.6-inch tablet from German company Neofonie.

The WeTab is expected to be released this quarter, though most of the tablets powered by Atom chips and running MeeGo will be released in 2011 and beyond.

Analysts have debated whether tablets, specifically, the iPad, are cannibalising the market for low-end notebooks.

“Sales of traditional notebooks appear to be feeling pressure from the iPad, causing a scramble by vendors to launch iPad-like tablets,” UBS analyst Maynard Um wrote in a research note. “We believe that a majority of this impact is occurring on the lower end of PC sales as the iPad is priced close enough to this range that it becomes attractive to consumers looking to make purchases within this segment.”

Best Buy’s CEO Brian Dunn fuelled the debate last month when he told the Wall Street Journal that tablets were eating into notebook sales, though he quickly retracted his remarks.

However, some analysts, such as Stephen Baker at the NPD Group, believe that such concerns are exaggerated. Otellini agreed, saying that, while tablet sales may nibble at the margins, he expects sales of both form factors to remain strong.

He indicated netbooks which, when introduced three years ago, generated concern that they would hobble traditional laptop sales. “Three years later both the PC and netbook market segments have grown substantially,” Otellini said. “And we believe that will happen again with tablets.”

He also said that despite the struggling economy and a slowdown of consumer purchases of PCs, the industry continues to sell a million PCs a day. “This is a pretty healthy state of affairs and I don’t see that changing in 2011,” he said.

In response to a question from an analyst, Otellini also said that, down the road, the Atom platform will be bolstered by technology Intel is acquiring through its $1.4 billion purchase of Infineon Technologies’ mobile chip business. He said he expects that eventually, Intel will integrate Infineon’s 3G and 4G capabilities onto the Atom chip.