Although Intel Corp.'s revenues in the cloud computing segment tripled year-over-year in the third quarter, the world's largest maker of chips does not see cloud computing replacing client-based computing since too many capabilities and features are needed for consumers nowadays and cloud datacenters cannot substitute them.

"Shipments into the cloud segment are up a very strong 200% from a year ago and up 50% from just last quarter," said Paul Otellini, chief executive officer of Intel, during the recent quarterly conference call with financial analysts.

Cloud-based services are definitely nothing new, but their performance demands are constantly rising and this year both Intel and Advanced Micro Devices started to offer processor models that are very suitable for cloud datacenters. As a result, Intel managed to triple sales of its processors and chipsets aimed at cloud market segment by three times year-over-year in Q3 2010.

Nonetheless, the company does not believe that cloud-based computing will be able to substitute conventional desktops or notebooks since demands of customers are too high to be satisfied with such kind of offerings.

"Expansion in cloud [are not] detrimental to our client business, and we do not see that even in enterprise. The virtualized desktop model does not seem to be gaining a lot of traction. People still want the portability of a notebook, they want the robustness, they want performance-based solutions, and they want media capability in enterprise," said Stacy Smith, chief financial officer of Intel.

Intel on Tuesday reported that third-quarter revenue exceeded $11 billion for the first time, up 18% year-over-year to $11.1 billion. The company reported operating income of $4.1 billion, net income of $3.0 billion and EPS of 52 cents. 

“Intel’s third-quarter results set all-time records for revenue and operating income. These results were driven by solid demand from corporate customers, sales of our leadership products and continued growth in emerging markets,” said Paul Otellini.

The highlights of Intel's Q3 2010 include the following: 

• PC client group revenue was up 3% sequentially, with record mobile microprocessor revenue.
• Data center group revenue was up 3% sequentially, with record server microprocessor revenue.
• Intel Atom microprocessor and chipset revenue of $396 million, down 4% sequentially.
• The average selling price (ASP) for microprocessors was approximately flat sequentially and up significantly year-over-year.
• Gross margin was 66%, consistent with the company’s revised expectation of 65 to 67%.
• R&D plus MG&A spending was $3.2 billion, consistent with the company’s expectation.
• The net gain from equity investments and interest and other was $115 million, lower than the company’s revised expectation of $175 million.
• The effective tax rate was 30.5%, slightly below the company’s expectation of approximately 32%.

Tags: Intel, Business