Intel is moving aggressively into the tablet and phone segments as Netbook sales begin to plateau, Chief Financial Officer Stacy Smith said in an interview today with CNET.

Intel chief financial officer Stacy Smith

Intel reported blockbuster first-quarter profits today of $3.2 billion, up 29 percent over the same period last year. Revenue came in at $12.8 billion, up 25 percent year-over-year. And the chipmaker is investing some of these hefty earnings into cutting-edge chips that will power smartphones and tablets in an effort to close the gap with competitors like Qualcomm and Samsung.

Smith confessed that Netbooks are the most vulnerable to tablet cannibalization, when asked about the growing popularity of tablets. "The Atom volume going into Netbooks is pretty flat quarter on quarter. Pretty flat year on year. If there's an impact with tablet cannibalization, it certainly is happening there. But even there it's still a $400 million business for us," he told CNET today.

But Intel is responding to the challenge, Smith said. The company is accelerating its push into the next generation of chips targeted at smartphones and tablets, namely Medfield and Cloverview--both code names for future Atom processors based on the company's 32-nanometer technology. Current Atom chips, including the tablet-centric Oak Trail part, use older 45-nanometer tech.

"Yeah, I think it's safe to say 'yes' [Intel is accelerating the rollout of those products]," Smith said. "Those are very good products in the tablet segment as they will be in the phone segment. Oak Trail is a good product. It starts the design win momentum. We'll quickly follow up with Medfield."

And this more aggressive stance on mobile devices is being funded by big profits coming from its new line of Sandy Bridge PC processors. "Customer reaction to Sandy Bridge is phenomenal. The mix is [weighted] toward the high end. As to ramp rate, it's by far our fastest ramping product, faster than Nehalem and faster than our previous generation," Smith said.

Smith continued, commenting on the Intel's response to the Sandy Bridge chipset glitch back in February. "At the time, we said we would lose $300 million worth of revenue and a couple of million units of sales in Q1. I'm pleased to say that based on cash flow performance [and] on the factories' ability to ramp the new chipset...and get it into the hands of customers, [that] completely mitigated that $300 million impact," he said.

Intel CEO Paul Otellini also had plenty to say about smartphones and tablets when responding to questions from analysts during the company's earnings conference call. Most notably, Otellini said that this year the bulk of tablet designs using the Atom processor are based on the Android operating system--not the in-house MeeGo OS.

"My sense is the bulk of the units, the [models] this year will be Android," he said, adding that "[regarding the] Honeycomb version of Android source code from Google...we're actively doing the port on that and expect to be able to ramp those machines over the course of this year."

And he also spoke about Nokia and how Intel is "redirecting resources" to other customers. "In terms of phones, obviously, we lost Nokia, which took a lot of wind out of the sales for phones this year. We've redirected those resources into a number of other major accounts...They're all based on Medfield, which is, I think, still the first 32-nanometer phone processor in the industry."

What about the timing of Medfield phone rollouts "And quite frankly, the limit in terms of them (the phones) getting to market is going to be the interoperability testing of the networks at this point in time. So I think I would be very disappointed if you didn't see Intel-based phones for sale 12 months from now," Otellini said.