Ina Fried

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Exclusive: Intel CEO Paul Otellini on Windows 8, the Tablet Market and Competing With ARM

Windows 8 represents a new kind of Windows release for Intel, in terms of the opportunities to expand into new markets, and the threats posed to the chipmaker’s core PC processor business.

On the one hand, the chipmaker sees the new Microsoft operating system as a way to drive traditional PC sales, as well as to crack the tablet market dominated by Apple’s iPad.

“It’s a watershed event,” Otellini told AllThingsD in a telephone interview Wednesday. “The fact it spans from traditional PCs and tablets and then in all the hybrid devices in between is really very powerful. It allows the hardware side to really exercise creativity in a way that we haven’t been able to do for quite some time.”

However, the release also presents new challenges, and comes at a time when PC sales are under pressure from a weak economy, with consumers opting to spend their electronics budget on other purchases, including tablets.

Intel has already warned that it expects slower-than-traditional PC growth in the fourth quarter, though Otellini said it is hard to say how much Windows 8’s move into tablets might help things.

“That particular element won’t be known until January, when you count the numbers and see how well Windows 8 tablets did versus Android versus iPad,” Otellini said.

Even on the PC side, Intel will have to deal with greater competition. Uused to competing against smaller rival Advanced Micro Devices, Intel now finds itself in competition with ARM-based chipmakers such as Qualcomm and Nvidia, now that Microsoft has a flavor of Windows — Windows RT — that runs on those chips.

Otellini noted that Intel has seen other rivals come and go in the PC market before, including chipmakers such as Via and Transmeta.

“I happen to be around long enough to remember those guys,” he said. “People come and go, and we’ve never had an exclusive, if you will. And, overall, the best chip has won.”

While Windows RT machines can boast strong battery life, Otellini said that Intel-based machines will be able to offer compatibility the ARM-based companies won’t, noting Intel-based Windows 8 machines will run all the software and Web sites written for past versions of Windows.

“That will not be as true on the RT [machines],” Otellini said. “I’m not sure that iTunes runs. I’m not sure that Quicken runs.”

As for whether Windows 8 is ready for primetime, Otellini says the PC industry is ready.

“It’s in perfect shape,” Otellini said.

The company also found itself with some explaining to do, after Bloomberg reported earlier this month that Otellini questioned Windows 8’s readiness at an internal meeting.

The company has since been trying to reaffirm its hopes for the release, including at an event in San Francisco.

Otellini says he is quite excited about the opportunity with Windows 8.

“We’ve been anxiously awaiting it,” Otellini said. “I’ve been doing this for a long time, and I haven’t seen this level of excitement and creativity within the joint Intel-Microsoft customer base in a long time.”

Otellini won’t be in New York for the big launch, though. He and other top Intel executives are at an internal meeting in San Diego for much of this week.

But Windows 8 represents an opportunity for the PC to continue to evolve and change. Touch machines in particular, Otellini said, are poised to become a mainstay throughout the PC market. “A year from now, I think selling a PC without touch will be very difficult, at least (for consumers). Enterprises are slower to change.”

Otellini said he has personally been using a touchscreen Acer machine. “It’s pretty compelling,” he said. “I never thought that I would … touch my screen much, but it works out pretty well.”

That said, Otellini isn’t convinced that everyone will shift to tablets.

“I happen to believe that the standalone tablet is not the form factor people will (move) to,” Otellini said. “The fact everybody is now fitting tablets with keyboards suggests that real buyers have come to the same conclusion.”

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I’m a giant vat of creative juices.

— David Pogue on why he’s joining Yahoo