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Analyst: Low Atom margins hit Intel again

Posted: 17 Apr 2009     Print Version  Bookmark and Share

Keywords:Atom  netbook processor  Atom cores 

According to an analyst, Intel Corp.'s bottom line was damaged for a second straight quarter by the company's misjudgement of the low margins on its Atom netbook processor.

According to Robert Castellano, president of market research firm The Information Network, the 45-nm Atom costs about Rs.1,445 ($29), compared with Rs.13,871.65 ($279) for the company's Penryn Core 2 processor for standard notebook computers.

Atom is found in nearly all netbooks—small, mobile computers that are lean on functionality and cost significantly less than standard notebooks.

A processed 300-mm wafer of Atom processors is worth Rs.57.18 lakh ($115,000) less than a 300-mm Penryn wafer, Castellano said in a statement.

On Tuesday, Intel reported a sequential increase in first quarter profit and President and CEO Paul Otellini said PC sales appeared to hit bottom. But Intel's net income for the quarter was less than half what it was for the same period of 2008, and the company's gross margin tumbled to 45.6 per cent.

"Intel rethought its production schedule in Q1 by allocating capacity for the Atom and for the Penryn, unlike Q4 where the cut back production on the more profitable Penryn," Castellano said. "We estimate that Intel produced 5 million (50 lakh) Atom processors and 50 million (5 crore) Penryns."

In January, Castellano suggested that Intel underestimated the netbook market after the company cut revenue and profit estimates for the fourth quarter of 2008. Castellano and others have maintained that Atom cannibalises the market for the higher-priced Penryn.

Castellano said Intel's deal to port Atom cores to silicon foundry Taiwan Semiconductor Manufacturing Corp.'s technology platform, announced March 2, would improve Intel's gross margin for the second quarter.

The Information Network is offering for sale a recent report on netbook-mobile Internet Device convergence through the company's website.

Also Wednesday, Craig Berger, an analyst with FBR Capital Markets, said Intel's first quarter results were stronger-than-expected but that the company's internal target of Rs.35.30 crore ($7.1 million) in second quarter revenue was "somewhat tepid."

-Dylan McGrath
EE Times

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