All Things Digital

Apparently, someone forgot to tell Intel (INTC) about the recession. The company reported a sharp rise in profit on Tuesday in the face of a flaccid U.S. economy. Revenue rose 9 percent to $9.5 billion from the year-ago quarter. And net income rose 25 percent to $1.6 billion, or 28 cents a share–well above the expectations of Wall Street analysts, who had projected earnings of 25 cents a share.

Best of all, Intel predicted more strong sales in the months to come. “As we enter the second half, demand remains strong for our microprocessor and chipset products in all segments and all parts of the globe,” Intel CEO Paul Otellini said in a statement. Comments like that, coupled with Intel’s strong Q2 earnings, should go a long way toward reassuring investors that the technology sector isn’t succumbing to the economic downturn. At least until AMD reports second quarter results on Thursday. Analysts expect AMD (AMD) to post a loss of 52 cents per share.

“Vista is built for businesses,” Brad Goldberg, Microsoft’s (MSFT) general manager for Windows product management, once said. And that may be so. It’s just not built for Intel’s (INTC) business. Because the chip-maker has decided against upgrading to Vista–ever.

“This isn’t a matter of dissing Microsoft, but Intel information technology staff just found no compelling case for adopting Vista,” a person with direct knowledge of the company’s plans told the New York Times.

Intel information technology staff just found no compelling case for adopting Vista. If that’s not a diss, then neither is “Windows Vista sucks.” Because if one half of the Wintel hegemony is balking at deploying the latest iteration of the OS on which it’s built, well that’s pretty ugly.

“I would buy a Mac today if I was not working at Microsoft,” longtime Windows development chief Jim Allchin said in January of 2004. And so too, perhaps, would Intel, if it wasn’t partners with the company.

What a lousy week for Intel, yeah? First Korea’s Fair Trade Commission fines the company $25 million for abusing its dominant market position there and offering discounts to PC-makers in an effort to drive rival AMD out of the market. And now the U.S. Federal Trade Commission has opened a formal investigation into its pricing practices.

In recent days the commission has subpoenaed Intel, AMD and a number of their PC-maker customers as part of a probe into Intel’s pricing policies, which some claim are engineered to maintain a near-monopoly on the chip market. Intel, which has long claimed that its business practices are well within U.S. law, did so again today in a statement announcing its cooperation with the FTC investigation. “The evidence that this industry is fiercely competitive and working is compelling,” it said. “For example, prices for microprocessors declined by 42.4% from 2000 to the end of 2007. When competitors perform and execute, the market rewards them. When they falter and under-perform, the market responds accordingly.”

But what if a competitor, say AMD, falters and underperforms because a rival is threatening its customers? What if it falters because a rival is using illegal inducements to dissuade PC-makers from buying AMD processors and “knee-capping” those who do? Which is what AMD accused Intel of in its 2005 antitrust lawsuit. In 2000, for example, Michael Capellas, then chief executive of Compaq Computer, allegedly told AMD that Intel had withheld the delivery of some microprocessors he needed for servers because of Compaq’s relationship with AMD. He told AMD he would stop buying from it, saying he “had a gun to his head.” And in 2004, Gateway officials are alleged to have told AMD that Intel “beat them into guacamole” in retaliation for their limited dealings with its rival. And these are but two incidents in a list that includes similar alleged acts of coercion by Intel involving 38 other computer makers, distributors and retailers.

Intel’s putting the mobile phone market on speed dial. Two years after selling off its chip business for mobile handhelds and cellphones to Marvell, the world’s largest chip-maker is turning its attention once again to the mobile phone market with dollar signs in its eyes. Seems the company can no longer tolerate the idea of ARM, and not Intel (INTC), inside many of the mobile phones on the market today.

In an interview with the Financial Times, Intel CEO Paul Otellini (pictured above) said he’s confident the company’s new Atom processor will expand Intel’s reach into the mobile phone market. “If you accept that the value proposition of the high end of the mobile-phone market is full Internet access that happens to have voice, my view is that it’s easier to add voice to a small computer than vice-versa,” Otellini told the FT, noting that the company’s expertise in PC chips will come in handy in making inroads into markets where devices are becoming increasingly more PC-like. Among them, those for televisions, ultra low-cost PCs, embedded controllers and, of course, smartphones. “We are bringing an element of computing into large markets, many of which are larger than the PC business, certainly in terms of units,” said Otellini. “Each of these four markets is a $10 billion opportunity by 2010 or 2011.”

Message to ARM: We’re coming for you.

Gaming piracy is as antiquarian a concept as PONG. So says Atari (ATAR) founder Nolan Bushnell. And who are we to disagree with the man who invented the world’s first (or second) video-arcade game?

In remarks at the Wedbush Morgan Securities annual Management Access Conference this week, Bushnell heralded the Trusted Platform Module as the gaming industry’s long-awaited solution to piracy. “There is a stealth encryption chip called a TPM that is going on the motherboards of most of the computers that are coming out now,” claimed Bushnell. “What that says is that in the games business we will be able to encrypt with an absolutely verifiable private key in the encryption world–which is uncrackable by people on the Internet and by giving away passwords–which will allow for a huge market to develop in some of the areas where piracy has been a real problem. … The TPM will, in fact, absolutely stop piracy of gameplay. … As soon as the installed base of the TPM hardware chip gets large enough, we will start to see revenues coming from Asia and India at a time when before it didn’t make sense.”

Thing is TPM is not exactly a “stealth” chip. It’s been around for years. Conceived by The Trusted Computing Group–whose members include Microsoft (MSFT), IBM (IBM), Intel (INTC), HP (HPQ) and AMD (AMD)–TPM’s purpose is to secure commercial software at the hardware level. As Ross Anderson, Professor of Security Engineering at Cambridge University’s Computer Laboratory explains, it essentially “transfers the ultimate control of your PC from you to whoever wrote the software it happens to be running.”

At least it does in theory.

Anyway, point is, TPM is a relatively well-known technology that’s been shipping in machines from Dell (DELL), HP, IBM, Toshiba, et al. for years. So presumably the “installed base” to which Bushnell refers is already quite large. Yet, we’re not exactly seeing those increased revenues from abroad. In fact, we’re seeing increased losses. Software piracy cost global businesses $47.8 billion in lost revenue last year, up 20% from 2006.

So what’s Bushnell going on about?

Who knows. But it might have something to do with this: In addition to being the inventor of Pong, and founder of Atari and Chuck E. Cheese Pizza Time restaurants, Bushnell also serves on the board of directors of Wave Systems (WAVX). And Wave Systems is a leading–but apparently struggling, provider of hardware-based digital security based around–you guessed it–the Trusted Platform Module.

Intel’s Core 2 Duo Extreme X9100 is shipping in “limited quantities,” all right. Quantities limited to Apple.

The Apple (AAPL) Web site went offline for a bit this morning, and when it returned it featured a handful of new iMacs, all of them apparently running Intel’s (INTC) as-of-yet unannounced X9100 Montevina processor. Priced between $1,199 and $2,199, the latest iteration of Apple’s iconic all-in-one system features the same enclosure as its predecessors, outfitted with the most powerful graphics cards yet available on the system and Core 2 Duos running at 2.4GHz, 2.66GHz, 2.8GHz and 3.06 GHz. All four have 1066MHz front-side buses and 6MB of L2 cache, configurations curiously absent from Intel’s current price list but expected to debut with Intel’s Montevina refresh.

How is it that Apple’s able to ship machines running unannounced Intel product? Perhaps the company’s designed its product roadmap to dovetail perfectly with Intel’s. Or, perhaps, Apple’s agreement with Intel is another of CEO Steve Jobs’s sweetheart-of-a-deal masterpieces that gives the company early access to Intel’s newest chips.

Apple (AAPL) has finally found a worthy use for the more than $18 billion in cash and short-term securities gathering dust on its balance sheet. The company’s acquiring P.A. Semi for about $278 million in cash.

A boutique semiconductor design company, P.A. Semi specializes in super-low power PowerPC processors. It boasts a rock-star design team littered with Itanium, Opteron and UltraSparc veterans, led by Dan Dobberpuhl, who was among the lead designers on Digital Equipment’s Alpha and StrongARM chips. And in February of 2007, P.A. Semi uncrated its PWRficient 64-bit multicore processors, 2-gigahertz ARM chips that consume just 5 to 13 watts of power, making them 300% more efficient than any comparable chip.

An impressive chip. Question is, what does Apple want with the impressive little chip shop that made it? Perhaps the same thing it was looking for in 2005 when it first approached the company about a supply deal. That agreement never panned out and Apple subsequently signed up with Intel (INTC) and made transition to X86 chips. The switch has gone well. So well, that it seemed almost a foregone conclusion that Intel’s new line of Atom processors would end up in everything from the next generation iPhone to that mythical iTablet, Apple gaming console and next-gen Newton.

But perhaps that’s not the case. Perhaps Atom’s not quite to Apple’s liking? Perhaps, as word on the street has it, it failed to produce the kind of battery life that Apple wants for its ultra-portable designs. Perhaps Apple just wants its own in-house processor design team, one it could use to push its own technical innovations into the market.

Or perhaps P.A. Semi’s working on a new chip so insanely great that Apple CEO Steve Jobs felt compelled to acquire the company? More to follow when Apple reports earnings later today.

A brassy little outfit called Psystar is getting a lot of attention today for peddling Leopard-compatible desktops. These “OpenMacs,” as the company’s named them, run on Intel (INTC) chips and feature 2GB of memory, a DVD drive and whatnot. They’re built from PC parts and, if you’d like, Psystar will even outfit them with Mac OS X Leopard.

Sounds like a compelling proposition for folks who would like the Mac OS on cheap hardware. Too bad the Mac OS X EULA specifically forbids installing the OS on non-Apple computers. Apple (AAPL) legal is, no doubt, already half-finished with a cease-and-desist letter.

It’s been 267 days since Apple last updated the MacBook Pro. That’s 81 days longer than the company historically takes between updates. Which means it was high time for an upgrade. And today we were finally given one.

This morning Apple (AAPL) refreshed both its MacBook and MacBook Pro lines, adding Intel’s Penryn Core 2 Duo chipset (up to 2.4 GHz for the MacBook and up to 2.6 GHz for the MacBook Pro). As Apple’s flagship portable, the MacBook Pro now boasts the same multitouch trackpad found in the MacBook Air and an LED backlighting option for the 17-inch model. All but the low-end MacBook feature a two-gigabyte RAM, with a build-to-order option that allows for their upgrade to a four-gigabyte RAM. New Macbooks are priced from $1,099 to $1,499, new MacBook Pros from $1,999 to $2,799.