SAN FRANCISCOIntel Corp.'s bottom line was damaged for a second straight quarter by the company's misjudgment of the low margins on its Atom netbook processor, an analyst said Wednesday (April 15).
According to Robert Castellano, president of New Tripoli, Pa.-based market research firm The Information Network, the 45-nm Atom costs about $29, compared with $279 for the company's Penryn Core 2 processor for standard notebook computers.
Atom is found in nearly all netbookssmall, mobile computers that are lean on functionality and cost significantly less than standard notebooks.
A processed 300-mm wafer of Atom processors is worth $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 percent.
"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 Atom processors and 50 million 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 cannibalizes 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
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 $7.1 million in second quarter revenue was "somewhat tepid."