Does Intel's Atom Threaten Celeron Sibling?

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As sales of Intel's Atom processor heat up, could it endanger the market for the company's other low-cost chip, the Celeron?

After all, Atom-based netbooks were a big item at CES last week, and even desktops based on the low-cost, low-power chip are starting to appear.

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Concerns that Atom sales could undercut the Celeron go back at least to last summer, when a Cnet article reported on concerns about "the challenge Atom presents for Intel." The new chip, according to two analysts not named in the article, "potentially cannibalizes a market that the longstanding -- and higher-performance -- Celeron processor has thrived in." Intel CEO Paul Otellini responded that "We do not see (Atom) replacing Celeron."

But lower sales all around for Intel make the question more urgent today. The chip maker released its fourth quarter report of a 90 percent drop in earnings last week, after earlier warning of reduced revenue forecasts. Net profit was US$234 million for the quarter ended Dec. 27, compared to $2.27 billion in last year's fourth quarter.Â

Technology Business Research analyst John Spooner told the Industry Standard that while he expects the Atom to eat some Celeron market share, it won't be huge. "I don't think you're going to see a huge double-digit drop in Celeron sales, at least not right away."

The two processors attract significantly different markets. While the Atom appeals to "customers that only care about basic Internet access...and the rock-bottom lowest PC cost," the Celeron offers a full computing experience. "I'm not sure [that many] users will give up that performance for what amounts to $100."

According to Spooner, the Celeron has more to fear from AMD's Yukon chip, recently renamed the Athlon Neo. "They're basically offering a lower-cost notebook chip" competitive in ability to the Celeron.

"People are looking for cheap computers these days. And if cheap is what sells, that's what vendors will have to offer."

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