The push into smaller gadgets is set to take Intel further away from Microsoft. "Netbooks" generally run Linux or Windows XP, which Microsoft has been trying to discontinue in favor of its flagship, Vista.
"Vista has a larger memory footprint, a larger graphics requirement and a higher price point. This is all about low-cost computing," Otellini said.
He noted that Microsoft has an operating system for smart phones, but it runs only on chips designed by Intel competitor ARM Holdings PLC.
"I see much of the activity in Mobile Internet Devices, sort of the evolution of the handset, being centered around Linux," he said.