Intel posted record sales and profits late yesterday despite indications that the rising popularity of tablets may be cutting into demand for computers using Intel's chips, the company's main source of revenue.
Intel made $3.4 billion in the fourth quarter on sales of $11.5 billion, both record numbers for the semiconductor company. For the full year 2010, the company posted record profits of $11.7 billion on $43.6 billion in revenue, including its settlement with AMD and a $1.45 billion fine from the European Commission related to antitrust violations.
"2010 was the best year in Intel's history. We believe that 2011 will be even better," said Paul Otellini, Intel president and CEO, in a statement.
Looking ahead, Intel said sales would come in around $11.5 billion for the first quarter of 2011, with gross margin of about 64 percent, slightly down from Intel's fourth quarter gross margin on 67.5 percent.
Intel's optimistic outlook comes amid reports from International Data Corporation (IDC) and Gartner that demand for personal computers is being affected by tablets like Apple's iPad and other consumer electronics, like game consoles.
Computer shipments grew 3.1 percent to 93.5 million units in the fourth quarter according to Gartner's estimates, missing the firm's earlier forecast of 4.8 percent growth for the fourth quarter of 2010. IDC estimated that global computer shipments grew just 2.7 percent to 92.1 million units in the fourth quarter, less than its projected increase of 5.5 percent.
"Growth steadily slowed throughout 2010 as weakening demand and competition from the Apple iPad constrained PC shipments," said IDC research director David Daoud in a report. "This situation is likely to persist in 2011, if not worsen, as a wave of media tablets could put a dent in the traditional PC market."
Intel is working to increase the range of electronics that use its chips, especially for consumer electronics like tablets and smartphones. The company has improved the energy efficiency of chips designed for smartphones and tablets, and signed a $1.5 billion deal with Nvidia to improve its graphics capability for high-definition video and help it compete against ARM.
In a conference call with analysts, Otellini addressed the company's struggle to compete with ARM in the mobile computing market.
"As we have done for decades in the traditional computing markets, we will apply the world's most advanced silicon transistor technology to these new segments to deliver the lowest power, highest performance, lowest cost products on the planet," Otellini said in reference to chips for mobile devices, according to a transcript on SeekingAlpha. "When these chips are combined with our support for the world's leading mobile operating systems, our proven ability to create broad ecosystem support and our growing software capabilities, I'm confident we will be very successful in these segments."