Intel Corp is changing with the times.
On Tuesday, Intel, the world’s largest maker of semiconductors, announced quarterly earnings that reveal that it is well on its way to embracing the technology industry’s fast-growing cloud-computing businesses.
Intel’s net income for the three months that ended on Sept. 26 was US$0.64 per share, above the projections of Wall Street analysts. Revenue was US$14.5 billion, down slightly from US$14.6 billion in the same period last year and above projections of US$14.2 billion.
“The quarter demonstrates Intel innovations in actions,” Intel CEO Brian Krzanich said in a release accompanying the numbers. “We executed well.”
Making PC chips is still a big business, but not the way it once was. In the most recent quarter, PC chips brought in US$8.5 billion, while chips for servers in cloud-computing data centers brought in US$4.1 billion, according to Santa Clara, California-based Intel.
A year ago, PC chips brought in US$9.2 billion and server chips just US$3.7 billion. The data center group, which includes cloud computing, also has much higher profit margins.
The shifting businesses at Intel are a reflection of broader changes in the computing industry. In the most recent quarter, worldwide PC shipments fell 10.8 percent from the same period a year ago, according to International Data Corp.
That does not necessarily mean doom for Intel. All those devices increasingly talk with companies that use cloud-computing technology, like Google Inc, Amazon.com Inc’s, Twitter Inc and Salesforce.com. Intel makes most of the chips that go into the servers in the data centers of cloud systems.
“About 30 percent of our server business is now to cloud companies, and growing at a fast clip,” Intel data center group head Diane Bryant said in a recent interview. “It’s the new opportunity for our revenue stream.”
Intel is trying to get into the mobile business and sensors too, so far with little impact. The shift to more data center chips means lots of things will change for Intel, not least the kinds of customers it is working with.
Intel’s mix of cloud-computing customers shows how much influence is wielded by just a handful of big outfits. Of 200 cloud company customers that Intel tracks, just seven take one-third of those chips: Google, Amazon’s Web Services business, Microsoft Corp, Facebook Inc, and China’s Baidu Inc (百度), Alibaba Group Holding Ltd (阿里巴巴) and Tencent Holdings Ltd (騰訊).
While the other 193 are now growing at twice the rate of the top seven, Bryant said, the big companies are unusually demanding customers, even designing their own chip modifications to make their global clouds work better.
“More and more of them have custom microprocessors from us,” she said. “What is really different is the pace of their market. They deploy our next-generation processors six months before we formally launch them, buying tens of thousands of chips that they ship to themselves.”
In addition, from all the cloud companies, 80 percent of every new major purchase is for a more powerful chip. The newer and more powerful chips tend to have even higher profit margins, and also spur Intel to develop new things faster. Last week Amazon announced it would soon have Intel’s most powerful chip available in its cloud.
However, Intel might also face new competitors in the cloud business.
Last week Qualcomm Inc, a major producer of chips for the smartphones that undid Intel’s PC business, announced a big move into server chips, particularly the kind that handle the workloads in cloud computing.
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