Intel's Next Hope: $300 Windows 8 DevicesIntel's Next Hope: $300 Windows 8 Devices

10 Ways Microsoft Could Improve Surface Tablets

On Wednesday, Intel announced its second-quarter earnings, which included $12.8 billion in revenue, a 2% year-over-year increase, and $2 billion in profit. The performance is positive, given the impact the slumping PC market has had on the company's core chip business. But Intel still trails ARM on the mobile scene, and the PC space is showing only trace signs of recovery, making the company's long-term prognosis uncertain.

Leading his first earnings call since taking over for Paul Otellini, new CEO Brian Krzanich touted at least one reason for short-term optimism: By the holidays, Intel chips should power a new generation of mobile devices, including sub-$300 Windows 8 tablets.

Due to the company's forthcoming Bay Trail Atom chips, buyers should see a number of touch-equipped Win8 clamshell laptops and convertible tablets below the $400 mark, and "in some cases," below $300. He also mentioned tablets -- presumably that run Android -- as low as $150.

Intel's Bay Trail is expected to dramatically improve the Atom line, which has trailed rival ARM, the current chip of choice for mobile devices, in both energy efficiency and graphics rendering. Atom processors already power small tablets that run the full version of Windows 8, such as the Acer Iconia W3. But the new chips should deliver performance more like a laptop's, while also providing all-day battery life.

[ Want to know a big reason Windows 8 devices aren't selling well? See Windows 8 Tablets' Big Flaw: Hardware Compromise. ]

At $300, these devices could be popular holiday items, especially if Windows 8.1 is well-received when it is publicly released this fall. Microsoft has previously pledged to bundle Microsoft Office with small tablets. It's unclear how much Office will appeal on devices with such small screens, but the free software can only sweeten the deal.

Then again, Intel also used the earnings call to downgrade its financial outlook. The company had projected modest annual growth, but now says performance will be flat. This revision takes some of the wind out of Krzanich's sails, and, by extension, Microsoft's.

That said, the CEO's optimism is not without merit.

Bay Trail could help Intel at the low end of the computing market, where mobile devices reign, and where Intel has watched from the outside as Samsung, Qualcomm and Apple have dominated. At the high end, more expensive, higher-margin devices with Intel's Haswell Core chips could also motivate holiday sales. These include not only Windows 8 Ultrabooks and tablets but also refreshed Apple laptops. Buyers will be further incented by not only Windows 8.1, but also Apple's OS X Mavericks. Haswell-powered devices should provide lighter, thinner designs along with better battery life and improved GPU performance.

Having largely failed to capitalize on the first wave of mobile apps, Intel is also making farther-reaching investments in next-gen applications. Last fall, Intel executives touted an era of "perceptual computing," in which we interact with devices with "human-like senses" as easily as we do other people. Intel has been advancing these technologies in the months since, with projects including gesture technology, voice recognition software and even machines that can perceive and respond to human emotion.

Still, Intel is playing from far behind in the mobile game. Its chances for PC resurgence are tied to enterprise upgrade decisions, and to a consumer population that increasingly prefers tablets to traditional computers.

Raj Talluri, a senior VP at Qualcomm, isn't impressed with Intel's progress, according to Bloomberg.

"There's a lot of talk about Intel and tablets," he said. "Clearly we see them still being far behind in mobile."

Talluri said the company's new ARM-based Snapdragon processor line will appear in 200 phones and tablets. According to rumors, these devices might include an updated Microsoft Surface RT tablet.

Intel recently scored a win when its Clover Trail+ chip was chosen for Samsung's newly announced Galaxy Tab 3 10.1. How widely OEMs adopt Bay Trail over ARM and whether the market takes to the new devices remain open questions.