Paul Otellini, Intel's CEO, says the company needs to get back to the quicker development cycles it had for its Pentium processors if it is to remain profitable and ahead of its competitors.

According to IDG, Otellini says that with a worldwide glut of microprocessors and weak corporate demand for Windows Vista, the company hopes to stay profitable by producing new chip designs faster than its competitors.
"There's clearly more capacity to build microprocessors than there is demand in 2007, and probably in 2008," Otellini told an audience at the Morgan Stanley Technology Conference in San Francisco.
He says that to decrease the impact of a head-to-head processor pricing war with rival AMD, Intel must return to the quick development habits it used when producing its Pentium family of chips. Intel backed off that pace after producing the Pentium 4 and soon began to lose market share when AMD launched the Opteron chip in 2003.
"We're doing product refreshes every two years, which is the model we invented, and then stopped doing after Pentium 4. Shame on us," Otellini says. "We fell off it — mea culpa, we screwed up — and now we're back on that pace."
The IDG report says that Intel has announced a pace of upgrading its processor architecture and shrinking its transistor geometry in alternating years. That puts Intel on schedule to upgrade its 65-nanometer Core 2 Duo processor to a "Penryn" 45nm geometry chip in 2007. The following year, Intel will upgrade its Core microarchitecture to the new "Nehalem" model and in 2009 shrink those chips to an even smaller, 32nm scale.
This strategy will allow Intel to preserve its dominant market share in the processor industry, which has swung in the past 15 years from a low of 72% to a high of 87%, Otellini says. "Staying in that range is our modus operandi, and the higher end of that range is better than the lower end," he adds.
"In terms of pricing, it remains very competitive," Otellini says. "But we believe you can show differentiation through platforms. Platforms like Centrino can insulate us from the commoditisation of the notebook, just as vPro can insulate us from the commoditisation of the desktop."
He says Intel needs to push its own pace of development because the market has not produced an expected jump in demand for PCs using  Windows Vista OS.
"Vista will play out like XP did," Otellini says. "People won't upgrade the OS on the machine; they will buy it on a new machine when they need to do that. I think people will like Vista as they play with it – it's nicer and prettier. For those who use Macs, it's closer to the Mac than we've seen for a long time."