Intel’s Data-Center Revenues Defy Industry Trend

Intel’s data center business is defying gravity.

Intel reported Jan. 17 that its Data Center Group revenues had climbed 6 percent in the last quarter, to $10.7 billion, even as volume fell by 1 percent. The average selling price for a Xeon processor and related chips climbed 6 percent from a quarter ago—and Intel expects DCG revenues to return to double-digit revenue growth. That contradicts the current industry trend of declining prices.

Overall, Intel reported net income of $11.0 billion on revenue of $53.3 billion, with profits falling 15 percent and revenue down just over 1 percent.

Wall Street continues to focus on Intel’s fortunes in the PC market, although Intel is doing its best to expand into mobile devices and other segments. Intel’s PC Client Group revenue fell 1.5 percent sequentially and 6 percent year-over-year, to $8.5 billion. Intel executives said that older stocks of Windows 7 computers have been flushed from retailer inventory, meaning that Intel itself sold fewer chips. Fortunately for Intel, the enterprise sales cycles in much more stable.

The key to Intel’s success in the enterprise? A diversified product mix, which provided solutions that rival AMD couldn’t match. Intel built its data center offerings around the “Romley” chip, which brought Intel’s “Sandy Bridge” architecture into the server space. But future revenue growth will apparently be sparked by two other key products: the “Knights Corner” 60-core Xeon Phi chip, which serves as a specialized accelerator for the data center, and the six-watt Centeron processor for the hyperscale market.

IDC reported last August that server sales had slipped yet again for the second quarter. Units rose during the third quarter, even as server revenues continued their downward slide. (Fourth quarter data has yet to be released.) The firm blamed a weaker macroeconomic climate for both quarters.

Despite those conditions, Intel has noted that data-center sales remain strong, and that the company as a whole is positioned well for the enterprise. Intel CEO Paul Otellini said that Intel is looking forward to launching “Haswell,” Intel’s latest micro-architecture that could eventually straddle the company’s desktop, mobile, and enterprise lines. That chip has been specifically optimized for low power, with an eye towards powering lines of Windows-powered tablets and convertible notebooks.

Intel’s manufacturing expertise remains the chief problem for its rivals, with a process that’s often a generation ahead of anything comparable. Later this year, Intel will ship 22-nanometer versions of its Xeon and Atom processors for the data center, Otellini said, presumably with options for either lower power or higher performance than the current generation of chips: “Micro architecture is hard and it’s something we’ve got 30 years of experience at, and these devices are simply becoming very small computers and that’s what Intel is exceptional at.”

Otellini also shot down a rumor that claimed that Intel would manufacture some Cisco ASICs, although it has launched a foundry business for clients that don’t directly compete with Intel: “The kinds of things we would do, we would not take business that would enable a competitor.”


Image: tkachuck/