Intel's Paul Otellini reported record earnings and in a conference call denied that ARM posed a threat to Intel's notebook CPU business, despite the fact that ARM would offer customers greater battery life on identical performance.  (Source: VentureBeat)

At the same time Intel is confident it can make headway in the tablets market with likely inferior products that have yet to be delivered to market.  (Source: Hi-Tech Russia)
Is Intel overconfident about ARM? Maybe, but it doesn't think so

Intel Corp. Chief Executive Paul Otellini was pleased to report strong earnings [report], with Intel making a fourth quarter net income of $3.4B USD (up 15 percent from last quarter) on revenue of $11.5B USD (up 3 percent from last quarter).  Intel's quarterly gross margin reached a record 67.5 percent, and the company reported an operating income of $4.3B USD.

For the year, Intel reported an incredible 67 percent rise in net income, which soared to $11.7B USD on net revenue of $43.6B USD (up 24 percent on a year-to-year basis).  The gross margin raised 10 percent for the year, and the operating income jumped 79 percent to reach $15.9.

Those strong results were overshadowed somewhat by Microsoft's announcement that it would offer full Windows support for the ARM architecture.  ARM is a superior architecture to Intel's championed x86 architecture in several ways.  It has more registers, so it eschews Intel's costly register renaming.  And it has fewer instructions, leading to more power efficient execution.  Thus an ARM laptop CPU could accomplish the same tasks while using less battery life.

Still, Intel's CEO Otellini claims his company isn't worried.  In a earnings conference call [audio, transcript] he comments on Microsoft's decision, stating:

In fact, in big Windows it had support for Alpha, PowerPC, MIPS and at one point ARM on the Vista program that they dropped. So this is nothing really new from that perspective. The plus for Intel is that, as they unify their operating systems, we now have the ability for the first time, one to have design from scratch, touch enabled operating system for tablets that runs on Intel that we don’t have today.

Secondly, we have the ability to put our lowest power Intel processors running Windows 8 or next generation Windows into phones, because of the same OS stack and I look at that as an upside opportunity for us. On the downside there is a potential given that Office runs on this products for – there is some creep up coming into, let’s say PC space. I am skeptical of that for two reasons. One, that space has a different set of power performance requirements where Intel is exceptionally good. Secondly, users of those machines expect legacy support in terms of software and peripherals that has to all be enabled from scratch for those devices.

Intel seems to be blaming Microsoft for its tablet delays.  However, Microsoft has showed off working Windows touch-tablets, where as Intel has yet to deliver tablet-geared chips (Atom-based "Oak Trail" and "Moorsetown").

Intel also expects the issue of legacy support to prevent ARM from making a larger splash in the Windows marketplace.

Intel is clearly feeling the heat from ARM.  That is ironic, given that it used to produce ARM CPUs, but chose to divest itself of those holdings. Intel acquired its ARM offerings in the 90s from its purchase of Digital Equipment Company (DEC).  At the time it took responsibility for the design and production the company's ARM-based "StrongARM" processors for mobile devices. In 2000 it transitioned to a newly named line of ARM CPUs called XScale. 

But in 2006 it sold its XScale mobile processor unit to Marvell. An XScale processor is found in the Blackberry Torch, among other devices.  To this day Intel and Marvell still co-own some XScale (ARM based) processor lines -- but only network processors, embedded processors and their ilk.  Intel firmly passed away its rights to mobile ARM designs.

There is no question that ARM represents a more power efficient architecture.  Of course that matters little in the desktop space.  In the server space it's mildly important, but GPU computing currently offers a far greater threat than ARM.  

Where the real trouble starts is in the laptop and tablet space.  ARM already rules the world of tablets, and Intel is unlikely to deliver a true competitor in terms of battery life in this space (hence its many delays). 

For laptops, Intel may currently reign supreme with its Atom-based chips and Core i-Series processors, but it faces a significant threat.  If Microsoft makes good on its promise of full in-Windows hardware support for ARM-based platforms, the story becomes the same as tablets -- ARM will be able to beat Intel's offerings on power, while offering similar performance.  The performance gap will largely be nullified by coming ARM chips, such as chips based on the eight-core A15 architecture revision

At the end of the day two things are sure.  First, Intel is doing great in the present tense.  It is recording record profits post-recession and enjoys a healthy lead in global CPU shipments.  

Second, though, is that ARM is serious threat to Intel's bottom line and growth opportunities.  ARM is unlikely to "kill" Intel's CPU business anytime soon (as we outlined, there are few advantages of ARM for desktops), but it may cut its sales.  

"If you can find a PS3 anywhere in North America that's been on shelves for more than five minutes, I'll give you 1,200 bucks for it." -- SCEA President Jack Tretton

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