Tuesday, March 1, 2011

Intel (INTC) Server Growth: Beyond the Obvious

Intel’s (NASDAQ:INTC) head of its data center unit, Kirk Skaugen, noted at the Morgan Stanley Tech, Media and Telecom conference Monday that there are more reasons to like the server market for the company beyond the migration from RISC-based processors to Intel processors.

Skaugen said this:

"So we have 1,000 plus Atom design wins now in embedded where if it’s consuming electricity it’s connected to the Internet. And these machines are doing service calls back to the Internet, etc. But also things like smart signs, if you go into the Beijing airport you’ll see they have hundreds and hundreds and hundreds of smart signs, so those are all connected to wireless to the Internet now and you’re able to download, manage those things in ways you never could before. And conservatively we’re saying over 1,000 exabytes of data in 2015.

"So this is driving for us tremendous cloud growth. We’ve seen a 130% increase in our public cloud volume, that is our processor shipments into the top 10, I could say probably 20 cloud providers, 130% growth since 2008 and the numbers we were quoting from 2009 were obviously higher since there was a dip there."

Skaugen is also convinced the networking market is moving the direction of PC microprocessors.

He added, "...if you look at an old Cisco Systems (CSCO) switch or router, it used to be internally developed ASIC from Cisco. If you open up a Nexus 5000 today it’s a Xeon microprocessor next to an ASIC. And I bet you in the future you’re going to just see two Xeon microprocessors there because we’ll put new instructions into the chip that will accelerate things that used to be proprietary."

Intel now owns 92 percent of the server market for processors, which has given them tremendous ability to raise prices, increasing them by about 60 percent over the last five years. They now account for close to 22 percent of Intel's revenue.

Intel closed Monday at $21.47, dropping $0.39, or 1.78 percent.

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