Santa Clara, California: Intel Corp expects to double its earnings growth in the next few years and on late Tuesday night raised its long-term margin outlook, as the world’s top microchip maker spreads its chips beyond PCs to gadgets like smartphones and televisions.
Chief executive Paul Otellini told investors on Tuesday that Intel is eager to establish a footprint in fast-growing — but intensely competitive — markets, diversifying beyond a PC market it now dominates.
“We are poised to take smart computing into whole new segments where it hasn’t been before,” Otellini said at the company’s annual investor meeting at Intel’s Santa Clara, California, headquarters.
The company also said it remains “highly confident” that it will achieve its financial goals for the current quarter despite rising concerns about European economies amid Greece’s financial crisis.
Otellini said on Tuesday he sees annual revenue and earnings growth reaching the low double-digit percentages over the next few years after shrinking in 2009, a year that marked the worst economic and tech spending downturn in decades.
He noted that the compound annual growth rate of its earnings per share during the past five years was roughly half of the low double-digit growth rate that the company is now expecting.
“So we’re essentially committing to forecasting to double the growth rate of earnings, and double-digit growth rate on revenue for the company as a result of all these initiatives,” Otellini said.
Intel said it now viewed its “normal” gross margin target level for the next few years to be within the range of 55 to 65% of revenue. Intel had previously defined a range of 50 to 60% as its typical range, though it delivered a 63.4% gross margin in the first quarter.
Intel, which makes the microprocessors used in more than three-quarters of the world’s PCs, gave investors a bullish assessment for the PC market in coming years, even as consumers increasingly snap up new breeds of gadgets like Web-connected smartphones and tablets like Apple Inc’s recently released iPad.
Otellini said he does not expect tablets to eat into sales of PCs. Including tablets, Otellini expects the PC market — now led by Hewlett-Packard Co, Dell Inc and Acer Inc globally — to grow between 15% and 16% during the next four years.
“My personal belief is that tablets, like netbooks, are additive,” Otellini said. “I don’t think that they will take market share away from other devices.”
Unlike in the PC market, where Intel’s microprocessors are dominant, the mobile device market is crowded with strong competitors like Texas Instruments Inc and Qualcomm Inc, which make chips based on ARM Holdings Plc designs and architecture.
Intel has developed the new Atom processor in recent years to compete in the mobile market. To date, Intel’s Atom has been widely adopted in no-frills netbook PCs but has yet to gain favor among phone-makers.
This month, Intel began shipping a version of the Atom that is more power-efficient and — according to the company — better suited to smartphones, though the company has not yet announced any customers for the chip.
Intel executives said the new Atom chip would be shipped in tablet PCs before making it onto smartphones. They added that the chip would now be compatible with Google’s Android operating system software, which is fast expanding its market share.
Executives also hinted at a new line of consumer retail products based on Intel silicon that will bring interactive capabilities to televisions and set-top boxes.
“We are gearing up for a massive, major retail launch for later this year,” said Eric Kim, senior vice president of Intel Architecture. He would not elaborate.
According to media reports earlier this year, Intel is working with Google and Sony to develop a new generation of TV set-top boxes. Intel’s Kim told analysts at Tuesday’s meeting he would not address those reports.
Shares in Intel slid 1.2% on Tuesday.