Only one word will do: impressive. But what is truly head turning about the latest figures from Intel isn’t that it merely posted its best year ever. No, what stands out is that the company broke its record at a time when its core market was in trouble. In other words, Intel seems to have managed to do what David Bowie and Madonna did so successfully in the music industry – and that’s change. But the big question mark still hangs. Can even Intel manage the incredible shifts in technology we are set to see?

The numbers speak for themselves. Revenue was up 8 per cent in Q4 from a year ago, hitting $11.5 billion. More to the point, quarterly net profits were $3.4 billion, no less than 48 per cent up on the same quarter last year.

For the year, revenue was $43.6 billion, operating income $15.9 billion and net income $11.7 billion.

Its boss, Paul Otellini, didn’t mince his words. “2010 was the best year in Intel’s history, we believe that 2011 will be even better,” he said.

But all this at a time when its sales of PC chips are struggling.

As far as the PC market is concerned, Intel faces two major hurdles. First of all, PCs themselves are struggling against competition from the iPad and other tablets. Recent figures out from both Gartner and IDC indicated that while PC sales are still rising, the increase is falling behind estimates. And it seems games console and iPad sales are encroaching on territory once dominated by the PC.

But, as we said yesterday, this trend is surely set to increase. Time was when we used our computer as a word processor and for spreadsheets, and all the other features were like an added extra. Now we use our computer to view video, listen to music, socialise via Facebook or a similar tool, and maybe even to read books. Word processing and spreadsheets are like an added extra. And that means a big challenge for both Microsoft and the virtual duopoly of PC chip suppliers: Intel and AMD.

Intel’s second hurdle relates to recent moves Microsoft has been making towards other chip companies. A few days ago, Microsoft announced that the next version of Windows will support ARM-based processors. ARM, the UK-based chip design company, has been a big hit with manufacturers of handheld products for quite a while. ARM licenses its design on to chip manufacturers. All in all, this has made the company most appealing to investors, giving it a forward p/e ratio of 90.

But the tie up with Microsoft is a real shot in the … excuse the pun, arm for the company.

But one assumes Intel is not too happy.

Maybe in a few years’ time the ads for PCs will say: ‘ARM inside.’

Not that Mr Otellini was having any of that talk. He said at a press conference this week: “Many of you have asked us questions about how we will compete with ARM in the new segments of mobile computing. Our answer is very simple: as we have done for decades in the traditional computing markets, we will apply the world’s most advanced silicon transistor technology to these new segments to deliver the lowest-power, highest-performance, lowest-cost products on the planet.”

He concluded: “When these chips are combined with our support for the world’s leading operating systems, our proven ability to create broad ecosystem support, and our growing software capabilities, I’m confident we will be very successful in these segments.”

So that’s the threat; the migration away from Windows, and Windows migration away from Intel dominance.

But here’s the good news. As more of us use our mobile phone or tablets as a link to the Internet, and we watch more video streams, we socialise more on Facebook, etcetera, we use up more processing power at the server end. If Google has its way, then our word processing and spreadsheets will be done via a server, too. So that trend may not be good for a company that relies on selling chips for traditional PCs, but it is good for companies that sell chips for servers.

And of course Intel sells chips for servers, too. And now it’s selling lots of them. That’s where the rise in profits is coming from. And the margin is better on servers too, hence the big jump in profits from a much smaller rise in revenue.

Besides, even at the user end, things are not quite so bleak. Sure, the PC market may be under threat, but the market for computer devices of some sort is growing, and that has to be good news for any chip company. The dream of a PC on every desk has been replaced by the dream of a computer in pockets, and purses, and in kitchens and beside beds.

And yet, change is difficult. Intel has done superbly well to grow when its traditional market seemed close to peaking. But can this run continue? The world of technology is now moving so fast that the mighty can be reduced to quivering wrecks in hardly any time at all.

And can Intel keep changing with the times? Maybe one day it will misread the runes, and that’s when the story of Intel will become truly interesting.

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