Intel to give Centrino a consumer push

The start of the effort will coincide with the back-to-school shopping season, which begins this month.

Intel already enjoys a strong position in consumer notebooks, where its mobile Celeron and Pentium 4 chips rank as two of the most popular processors. But Intel wants to shift consumers to its Centrino chip bundle, as the company attempts to continue profiting from the huge gain in popularity notebooks have made with consumers over the past two years.

The chipmaker has several reasons to prompt a transition from the Pentium 4, not the least of which is economic. The Centrino bundle, consisting of Intel's Pentium M chip, chipset and wireless module, sells for much more than a Pentium 4 processor. A 1.7GHz Pentium M lists for $637, and a Centrino bundle with the chip costs $713. Meanwhile, a 2.8GHz desktop Pentium 4, a processor commonly used in many consumer notebooks, costs $262.

Expanding Centrino would also improve the fortunes of Intel's money-losing communications group.

"We plan to ship over 2 million Pentium M processor units in (the third quarter) as we market Centrino to the consumer segment for the first time, in conjunction with the back-to-school season," Paul Otellini, Intel's president, said Tuesday during a conference call following the release of the company's second-quarter earnings.

Intel would like to see Centrino take over the bulk of the notebook market by the end of this year, said Shannon Johnson, a company spokeswoman.

The price of success
Intel has its work cut out for it in consumer notebooks. Nearly 37 percent of notebooks sold at retail during May came with a Pentium 4, according to market researcher NPD Group. Centrino and Pentium M sales combined totaled just over 3 percent, NPD said.

Meanwhile, more than half of notebooks sold at retail that month in the United States were priced at $1,200 or less. Of those models sold, 18 percent were priced at $1,000 or less, while 36 percent sold for $1,000 to $1,200, NPD said. The majority of the sub-$1,200 systems used Intel Celeron or Advanced Micro Devices' Athlon XP-M processors.

Notebooks that sold for more than $1,200 mainly used desktop Pentium 4 or Pentium 4-M processors. Consumer-oriented Centrino notebooks are priced even a bit higher, averaging about $1,500.

Intel will forge ahead, regardless of recent sales data. The chipmaker has orchestrated rapid transitions between processors in the past. Its Pentium III quickly gave way to the Pentium 4. But analysts say that Centrino may take longer to catch on with consumers.

Price, one element that is working against Centrino, will come down eventually. But consumer taste is harder to predict. As shown by May's retail sales data, consumers--many of them buying notebooks for the first time--are opting mostly for lower-priced notebooks or big-screen, desktop-replacement notebooks.

Manufacturers such as Hewlett-Packard and Toshiba are expected to increase their stable of consumer Centrino models. However, they will continue offering inexpensive Athlon XP and Celeron models, as well as large Pentium 4 notebooks, because they sell.

Intel will hedge its bets a bit by continuing to offer faster mobile Pentium 4 processors for those customers who want larger notebooks. But it insists that the mobile Pentium 4 will make up only a small part of the market, between Celeron and Centrino.

Intel's ad campaign will extol the benefits of Centrino, paying particularly close attention to students. Because it includes a wireless connection, Centrino lets people connect to wireless networks for surfing the Internet or checking e-mail. Centrino notebooks are thinner and lighter and offer longer battery life than Pentium 4 systems, appealing features for students or anyone who frequently operates while unplugged from power or who often uses wireless networks.

Intel also plans to improve Centrino with a new 802.11g wireless module and faster clock speeds, later this year. To sway the public, the chipmaker will have to more effectively tout the virtues of Centrino, said Alan Promisel, analyst with IDC.

"Right now, the benefits of Centrino are largely unknown to the consumer," he said. "First time notebook buyers just aren't as concerned with size and weight."

Slow start aside, Centrino has the potential to increase its presence at retail over time, as the number of consumer models offering the chip increases. The question is whether this will happen quickly enough for Intel.

"There will be a lot of price overlap between Centrino and Pentium 4 notebooks," Steve Baker, an NPD analyst. But "given their different characteristics, it's likely be a very clear choice."