Job postings suggest Amazon is planning to make its own ARM-based servers.

Google eyes Power chips

Software Engineer, ARM Server ($FB)

Looks like everyone is evaluating ARM servers; makes sense to me. Small, cheap servers that can saturate a 100Mbps network connection…

I think $INTC is under attack on all fronts:

Servers: ARM could make serious inroads (classic Clayton Christensen, the innovation looks like a toy, flies under the price umbrella till it’s too late for the incumbent, who cannot (or will not) self-cannibalize based on something that looks like a toy …)

Mobile: $QCOM, $AAPL, SMSN:LI rule here…

Desktop/Notebook: As I posit in my last article, $AAPL may make a move here (or not). But the fundamental thesis is the same. Desktops will move to from the Core variants to the Atom variants. They’re nearly good enough now. $MSFT providing Windows free for low-end boxen? It’ll only add to the fire.

If the move from Core/Xeon series is towards Atom – it will margin compression. If it’s towards ARM, it will mean substantial loss of market share. And $INTC is now setup to be a player at scale. Not sure if they can compete like a scrappy little startup anymore. I wonder if that’s left in the DNA?

As a long term $INTC fan – nearly every compute device I’ve bought had Intel Inside, this marks the end of an era to me….

When will the transition be visible in stock prices? Is much of this already priced in?

With $INTC trading near the top of it’s 52W range ($27.24) I think the risk (for a short) is quite low. Say about $4  = 15% ($31), which is where many analysts are calling it. The gain could easily be $7 = 26% ($20). I think it’s time to nibble a bit…

Red:

Short interest seems to be under 1% of the float, why is it so low?

PE ratio is just 14; multiple expansion is easily possible if $INTC shows signs of life in the mobile space. $INTC has been talking about a better radio, which seems to be a key weakness for them….

There could be a revival in the desktop space (unlikely IMHO).

The main risk I see is that the move could take longer than I can hold … will a move take more than a year?

Amber:

I just love the Xeon Phi (in abstract terms). Can’t see the whole point of Tesla/GPU compute if you can do cheap enough, dense enough full-featured cores. A whole bunch of ‘em. But then there’s the fun projects like Parallella. The software effort required for to write apps for GPU compute languages has never made sense to me.

Green:

NUC is a joke.

Atom in the Datacenter means severe margin compression. ‘Course an Atom doesn’t measure up to the raw compute of the Core / Xeon E series … but then the price differential is substantial.

What’s the $INTC bull case?

1) Success in mobile – scaling down the Ivy-Bridge architecture to be competitive in the 2W TDP space.

I think $INTC is competitive already – but it’s not leading to design wins because:

1.1) Low-end is extremely price-conscious; INTC realistically has not much   chance of competing in this space. Sure they can ‘bribe’ companies (contra-revenue as they’re calling it) to use INTC, but I think this is akin to buying eyeballs….pointless in the medium term.

1.2) High-end, there’s no market outside of AAPL, SMSN and neither is going to use INTC at the moment. Perhaps Nokia (err… Microsoft Mobile Oy) may give it a shot? Lenovo? maybe, but really I can’t see a third player (at any scale) for at least the next few years.

Can INTC use the leverage it has – in terms of desktop/server to bully Apple? Don’t think so — Apple is perhaps one the largest single customers for INTC, they need Apple more than Apple need INTC.

2) Datacenter growth continues un-abated, with Intel continuing to rule the roost, picking up another couple of percent in terms of market-share by destroying what little remains of AMD?

I certainly think Datacenter will continue to grow pretty fast. The cloud is more important than ever. Indeed INTC bet that growth in mobile would require equivalent growth in datacenter and the margins in datacenter were much fatter….(find quote from outgoing INTC CEO here…). Is the relationship linear?

Advertisements