Outgoing Intel CEO knocks Windows 8, predicts $200 touch PCs this year

Intel's outgoing CEO has taken a few parting shots at Microsoft's Windows 8 as he explained a slump in both revenue and profits for the first quarter.

Paul Otellini, who will retire from Intel next month, joined a chorus of others, ranging from analysts to longtime Microsoft hardware partners such as Dell, in placing some of the responsibility of the latest PC sales contraction on Microsoft's shoulders.

"There is an adoption curve," Otellini acknowledged, talking about Windows 8 and its "Modern" user interface (UI), a radical overhaul of the traditional desktop. "We didn't quite have that same kind of adoption curve in Windows 7 versus XP before it. This requires a little bit of training."

Otellini, however, did say, "Once you get over that adoption curve, I don't think you go back." He also argued, as have most analysts and many Windows 8 users, that on a touch-enabled device Windows 8 is easier to use than Windows 7.

Shortages of touch-ready hardware, particularly notebooks, have plagued the industry since Windows 8's launch. And the higher prices of touch PCs have put off many consumers, who have been trained for years to expect low-priced machines. When they can't find a touch PC in their price range, experts have said, they instead steer toward lower-cost touch tablets.

Otellini said much the same. "I think people are attracted to touch, and the touch price points today are still fairly high," he said during Tuesday's quarterly earnings call with Wall Street. "[But] they're coming down very rapidly over the next couple of quarters."

The soon-to-be-gone CEO also predicted prices for future Windows 8 devices that should reach market later this year as Intel rolls out new processors.

Touch-enabled ultrabooks, Intel's brand name for thinner, lighter Windows laptops, should sell for $US499 to $US599 in the fourth quarter, said Otellini, with the latter more common. Those machines will be equipped with chips out of the new Haswell architecture, which will replace the current Ivy Bridge line of CPUs.

Other, even less-expensive systems, will be fitted with Bay Trail chips, the next-generation in the Atom line; the latter compete, in many cases poorly, with the ARM architecture that powers most smartphones and tablets. Stacy Smith, Intel's CFO, pegged prices of those Bay Trail-powered touch devices -- which could include keyboard-equipped tablets and so-called "convertibles" that transform from tablet into notebook -- at around the $US300 mark.

A few minutes later in the earnings call, Otellini went even lower. "If you look at touch-enabled Intel-based notebooks that are ultrathin and light using non-core processors, those prices are going to be down to as low as $US200 probably," he said.

Gartner, which recently questioned whether Microsoft's Windows 8 strategy could keep the Redmond, Wash. firm among the small circle of influential technology companies, dubbed what Otellini called "ultrathin" as "ultramobile" instead to separate them from bulkier, heavier laptops.

Shipments of ultramobiles, Gartner has forecast, will jump 140 per cent this year to 23.6 million from 2012's 9.8 million, largely due to lower prices, touch, and the Haswell processor line.

According to rival research firm IDC, PC shipments were down 14 per cent in the first quarter of 2013 from the same period the year before. Its analysts largely blamed Windows 8 for the decline, claiming that consumers, confused by the new OS, had delayed purchases of new PCs or simply moved on to tablets.

Other analysts have countered IDC, instead pegging high touch system prices as the culprit.

Intel posted revenue for the quarter of $US12.6 billion, down 2.5 per cent from last year. Meanwhile, Intel said, the quarter's $US2 billion profit was off 25 per cent.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

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