Look at production costs THG!!!! Cannibalization of Celeron sales would not be a bad thing as the atom is what 8X smaller? so unless it is selling for 10X lower price, then it's probably not impacting profits. Obviously Core is a totally different story - and that is what Intel is worried about. The main problem Intel has with it encroaching on Celeron is that it would just be a matter of time before it moved further on up to the low end Core2's.
Recall, Atom was never meant to be an everyday CPU, yet the fanboys seem to want to trash it. Yet noone trashes Geode, or ARM or other devices which have a specific application it is designed for. Again remember, Atom was desigend with consumer electronice, smart phones and MID's in mind - netbook was just an offshoot. Now folks are whining that a product designed for ultramobile devices is not good enough for everyday computer use.
Given where the market is headed, I would expect Intel to 'split the Atom' - a beefed up version after the SOC design to move upstream in the netbook, CULV notebook market and a scaled back version for the intended smart phone, consumer electronic market. The only real question is are the idiot fanboys going to continue whining about HD playback on devices that have screens NOT CAPABLE of diaplying those resolutions?!?!