(continued from previous page)

For the upcoming quarter's guidance, Bryant projected a seasonal dovetail to the revenue downturn, down 7% quarterly to between $8.7 and 9.3 billion. Investment in the 45 nm product drive will reduce margins another 3 points for the quarter, and gross margin will decline below the 50% mark. Capital spending will continue to go down, this time by another 7% quarterly, even while the 45 nm investment proceeds on track.

At Intel's old pace, it used to incur startup costs every two years. With the move from 90 nm to 65 nm and now to 45 nm, that treadmill has accelerated to a one-year pace, although from Intel's vantage point, the move to 65 nm began in '05 and is about 90% complete today. Is there any reason to believe it could return to a two-year pace after the 45 nm launch?

Intel CFO Bryant gave some indications that two years may be a little more comfortable in 2008 and thereafter. "We're pretty consistent on our two-year treadmill...we think we stay on it, we don't accelerate it. We also think we don't drift back from it. So I do think that leaves us with every two years, a new generation startup spike."

How much of an impact will this month's consumer introduction of Microsoft Windows Vista have on sales? In a very diplomatic way, CEO Otellini put his best spin on the concept of "wash." "We're optimistic about the launch and the prospects of Vista, particularly in the consumer markets," he told analysts. "I think it's going to be instant adoption for new machines right out of the chute, and that's particularly important when you think about the fourth quarter, where the action was."

That action was in the notebook segment, Otellini said, where sales peaked at record levels for manufacturers even with customers knowing they weren't getting Vista until at least January. So you could look at it as customers anticipating Vista for next month, or not really caring that much about it...Which is it, Paul?

When asked in very careful language whether the Vista launch changes the "linearity" of product growth -- whether it adds to it or subtracts from it -- he responded with neutral, though certain, terms: "Not from our perspective. Our loading with our customers is in normal linearity in terms of the backlog, by a month."

Later, Otellini said he's comfortable with projections made by independent industry analysts, that PC unit growth will be at the 8 - 10% range in 2007 - lower than the 12% range we'd become accustomed to.

"I think...the trends we're likely to see and that we're banking on are of Vista helping consumer sales, particularly in notebooks, and the secular trend where the overall growth in the Internet is driving more servers, because there's more data to be stored," Otellini remarked. "Those two trends are not going to go away. The question that we don't know yet is whether the combination of Vista plus the vPro product line out of Intel, will create a change in the refresh rate of enterprise-based PCs outside of notebooks. That's just a bit of an unknown at this point."

Dual-core penetration of the market has been huge, driving perhaps 90% of sales last year. Will quad-core have the same effect, Otellini was asked? Maybe not so much, he responded, or at least not so soon: "I think in the performance-intensive parts of the market, which are the gamers and the workstation parts of the market and [dual-processor] servers, quad-core will have a very strong penetration. It will not have a widespread consumer penetration until we get quad-core into the notebook, because that again is the fastest growing part of the market...I don't really see it getting there over the course of at least the first half of '07."

There appears to be a bright light at the end of Intel's tunnel of restructuring, and it's about one year away. Actually, when you squint, it looks like four lights - and they're really, really tiny.