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Intel rides high on strong notebook demand

Recession or no recession, CEO Otellini remains bullish on Intel's prospects in the second half of year.

Intel says its business remains unaffected by the economic headwinds set loose by the subprime crisis.

Speaking with analysts following the release of its second-quarter earnings statement, Intel's brass remained upbeat about demand for Intel products--especially for notebook processors.

"We are very aware of the global economic issues which dominate the world these days," said Intel CEO Paul Otellini. But he quickly added that order patterns played out as expected in Q2 and that the company sees "continued healthy demand" in the third quarter.

Intel CEO Paul Otellini Dan Farber/CNET News

That news may provide some relief to worried Wall Streeters, fretting about the impact of the banking crisis on IT demand.

Notebook sales now comprise more than half of the market but they also carry lower average selling prices. Intel said that as notebook prices continue to decline in price, Intel expects to see increased demand.

"What we're seeing is a fundamental shift to notebooks," said Otellini, adding that the crossover transition was taking place six months sooner than expected.

In particular, the company expects to ship more Atom-based notebooks in the second half of the year. The design of the Atom processor is particularly suited for the emerging market of low-cost subnotebooks. However, Intel does not see the Atom cannibalizing its other notebook product lines.

"You're dealing with something that most of us wouldn't use," said Otellini, adding that Atom was designed primarily for Net access. "You would not want to run YouTube videos on these things...just like there's a market for lower performing cars and higher performing cars."

After the close of the market, Intel announced second quarter net income of $1.6 billion, or 28 cents a share, compared with $1.28 billion, or 22 cents a share, a year earlier. The company is forecasting Q3 revenue between $10 billion and $10.6 billion. Intel forecast gross profit margins of 58 percent, plus or minus two points, a trend the company expects to continue into the end of the year.

Intel also sold a record number of chipsets in the second quarter. That may signal good times on the horizon because chipsets usually are a harbinger of chip sales.

"Everything we see so far in demand for chipsets is equally strong to what you saw in Q2," Otellini said.