Will Intel Have Its Cake and Eat It, Too?

To be perfectly honest, I've had trouble joining the netbook craze. Though their popularity is undeniable -- millions of consumers have picked one up to act as an ultra-portable, inexpensive complement to their primary notebooks -- the devices have looked and felt too much like glorified toys for my taste. Sure, the logos might say Acer, HP (for Hewlett-Packard (NYSE:HPQ)), or Dell (NASDAQ:DELL), but with their tiny displays and underpowered processors and graphics chips, I half-expect them to say Fisher-Price.

I'm sure that Intel (NASDAQ:INTC) has heard its share of critiques about netbooks that fall along those lines, and the company's hoping that its latest Atom processors, named Pine Trail, will help counter them. The Pine Trail processors provide more computing power than the N270 and N280 Atom chips used in many netbooks today, and they also improve on their predecessors by integrating a graphics processor and memory controller, instead of having these features handled by separate chips. A minor upgrade to the Atom, this isn't.

The higher integration found in the Pine Trail platform should lead to lower netbook component costs and higher battery life. But Intel seems most interested in touting the performance benefits of the platform, and it's hard to blame it. While netbooks running the N270 and N280 have proven adequate for basic Web browsing and productivity tasks, they've also had their share of problems dealing with multimedia tasks. Try getting your average netbook to play a high-definition Web video clip or any half-decent 3-D game, and chances are it'll stutter more than Woody Allen.

Pine Trail might not turn netbooks into multimedia powerhouses, but from the looks of things, it should cut down on such frustrating experiences. And in doing so, it could add more fuel to the netbook boom and do a number on graphics and motherboard chipset rival NVIDIA (NASDAQ:NVDA), which has high hopes for its Ion platform.

The problem for Intel is that the Pine Trail chips might be a little too good. We've already seen Atom chips used in a handful of low-power desktops and servers. Thus, it's not farfetched to see the latest chips, with their superior multimedia performance, start to be used in bigger, more conventional notebooks. Makers of conventional notebooks in the "thin and light" category could easily be drawn to the Atom because of its low-power capabilities. And if they are, there's a good chance that the Atom would displace a more expensive Intel notebook processor along the way.

If that happens, then Pine Trail's "success" would be just the latest shoe to drop in a decade-long problem for Intel and Advanced Micro Devices (NYSE:AMD). While Moore's Law and improvements in chip architectures have led to massive gains in processing power, software demands simply haven't kept pace. You just don't need Intel and AMD's most powerful chips to run the latest version of Microsoft (NASDAQ:MSFT) Word -- or for that matter, to play a high-definition video clip. And as a result, consumers and businesses have become more and more willing to settle for less when it comes to PC microprocessors.

In the case of Pine Trail, however, this could mean that buyers of low-end conventional notebooks will "settle" for chips that cost only $43 to $63. Even for a company as experienced in dealing with average selling price declines as Intel, that could be a tough pill to swallow.

Care to disagree, or have other thoughts on Intel's netbook strategy? Sound off in the comments section below.