From CES, Good News-Bad News Intel Take

LAS VEGAS -- The 2009 Consumer Electronics Show doesn't open until Thursday morning, but Intel(INTC Quote) has rained on everyone's parade.

No company likes to start the New Year with really bad news. So when a company tells the world a week in advance of its earnings report to expect lower numbers, it's a very big deal. But not completely unexpected.

Intel is the world leader in computer processors. These chips are everywhere from laptops to cell phones to televisions and nearly everything electronic you can think of. Obviously, in a recession, when consumer spending slows, so will sales -- and the need for Intel chips.

But there's also a good news-bad news aspect to Intel's woes as well. While desktop and notebook sales are on the downswing, Intel is actually selling more of its Atom processors for use in Netbook computers. Those are the wildly popular mini-notebooks from companies like Asus, Dell (DELL Quote), Hewlett-Packard(HPQ Quote), Lenovo and more. Most of these computers are Intel Atom based and also use Intel's 945GM chipset for audio, video and other functions.

Atom processors are modern, basic, energy efficient and more importantly very inexpensive -- perfect for tiny laptops. They are also cheap , which means lower profit margins for Intel. So, for every Atom-based computer produced there is someone who won't be buying a bigger/more expensive computer with a higher-profit Intel processor (Core2 or Centrino). So, Intel may be selling a lot of Atoms - but they're not making as much of a profit by doing so.

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