Intel flash dicey, Netbooks solid

Comments by CEO Paul Otellini and CFO Stacy Smith during Intel's 2008 first-quarter earnings conference call on Tuesday cast a pall over the chipmaker's flash business while boosting the outlook of Netbook chips.

First, a quick inventory of the comments made by Otellini and Smith about Intel's NAND flash memory business. Overall Intel gross margins were affected by collapsing prices in the NAND market. Intel is currently in a joint NAND chip manufacturing partnership with Micron Technology. NAND flash is used in large-capacity storage devices which are, in most cases, interchangeable with hard disk drives. Intel said earlier this year that it is getting ready to enter the large-capacity solid state drive (SSD) market with capacities ranging up to 160GB. Intel sold off its NOR flash assets to STMicroelectronics last year.

Flash cannot become a long-term drag: "We made a decision with Micron to push out the timing of the joint Singapore plant. Last month I committed to our investors that I would not let the flash memory business become a long-term drag on company financials. I want to assure shareholders that we entered this business to make money and we will continue to make the appropriate decisions to that end," Otellini said.

Sale of NAND business possible?: In response to a question from an analyst about the possibility of selling off the NAND business Otellini, carefully choosing his words, said this: "There's a lot of ideas that we have here. Talking about them publicly before they're realized or discussed I think is inappropriate and weakens our negotiating position and our options. Really can't comment on that prior to doing it. We had similar questions raised on NOR a year and a half ago. About what are you going to do about it. Couldn't answer those even though we were in discussions with ST (Microelectronics) at that time."

NAND double whammy: "Gigabit production doubled in Q4 to Q1. We had a new factory come online. Bit doubling (doubling the storage capacity of the chips) hit us at the same time that prices came down," Smith said.

Otellini and Smith referred to the positive outlook for "Netbooks" a number of times. Netbooks are inexpensive ultrasmall, ultralight notebooks such as the Asus Eee PC or HP Mini-Note (though the Mini-Note currently uses a Via processor). In some instances during the conference call, it was apparent that "Netbook" was a blanket term for any small computer design using the Atom processor.

Netbook drives desktop-mobile crossover: "With the intro of the low-cost notebook category (Netbook), we believe shipment crossover of desktop PCs to mobile PCs will now happen this year not next year as anticipated...Netbooks and Atom (processors) are starting to show fairly good volume projections," Otellini said. Crossover is the point at which Intel ships more mobile processors than desktop processors. "(The Netbook is) like the early phase of the iPod as different versions and different price points come out," he added. The last remark referred to the many different iPod designs that eventually emerged.

Netbook ramp: "I see (the Netbook) as being a contributor over the course of the year and we're going to start to see the impact of that in the second quarter. It does look to be driving some incremental unit growth beyond what I thought when I first set my forecast for the year," said Smith.

Eight million 45-nanometer processors: Intel has now shipped "in excess" of eight million 45nm units, according to Otellini.