Intel Vs. AMD in the Battle for the Data Center (INTC, AMD, BRCM, QLGC, MSFT, ARMH)
Some observers have accused Intel (INTC) of sour grapes in making disparaging remarks about arch rival Advanced Micro Devices‘ (AMD) recently announced acquisition of SeaMicro, but Next Inning Technology Research Editor Paul McWilliams, whose Next Inning model portfolio has returned 306% since inception, says both Intel and AMD have made the right acquisition decisions given their market and competitive situations. More important, McWilliams says, is investors need to understand how these intersecting strategies will change the competitive atmosphere in the data center sector for incumbent semiconductor suppliers like Broadcom (BRCM).
During a recent press conference, Diane Bryant, an Intel vice president and general manager of its Datacenter and Connected Systems Group said, “there were very few people (SeaMicro) didn’t shop their solution to. They came to us… We were not impressed, and we declined.”
McWilliams says dismissive attitudes aside, Intel simply didn’t need SeaMicro, at least not to the degree that AMD needed to make the acquisition. Intel has been able to leverage its leading position in providing microprocessors to the data center, and has a head start on AMD as the two begin battle on even greater footprints in the data center.
McWilliams points out that Intel extended its presence in the data center far beyond its traditional server applications prior to initiating acquisitions of technology it can now use to glue it all together. Last year Intel acquired Fulcrum, the leading provider of super-low latency Ethernet switches and, last January, Intel acquired the InfiniBand product line from QLogic (QLGC). McWilliams expects Intel will roll out new parts based on the technologies it got in these acquisitions that will include embedded security and the technology needed optimize virtualization throughout the data center. The point here is Intel was too far down the road to go back and fully leverage the different architectural approaches pioneered by SeaMicro.
AMD, on the other hand, was so wrapped up last year trying to hire a new CEO and getting the jump on Intel in heterogeneous personal computing processors with its new Fusion processor, it was behind the curve in widening its data center strategy. Due to this and McWilliams’ belief that SeaMicro has in fact developed the right technology to optimize a heterogeneous computing environment, the SeaMicro acquisition fits AMD’s needs perfectly.
In his recently published State of Tech report that includes a special section on emerging data center strategies, McWilliams wrote, “I think we can now say there is ample evidence that the focus today at both Intel and AMD extends far beyond the classic server market and well into the heart of complete data center solutions.”
McWilliams has advised Next Inning readers that the SeaMicro acquisition “has much more potential than meets the eye. I think it was a brilliant strategic move by AMD, and the best way to speed it towards a more competitive position as a data center solution provider.” Due primarily to the acquisition news, McWilliams raised the exit target for AMD he set last January when he called the stock a buy at its then current price of $5.43. Next Inning free trial subscribers will have immediate access to McWilliams’ comments on where he believes the stock his headed next.
McWilliams keeps Next Inning readers in front of the news. While other news sources have focused on what they call the “post-PC era” and the competitive threat that Intel will face when Microsoft’s (MSFT) new Windows 8 operating system opens the PC market to chips based on processors designed by ARM Holdings (ARMH), McWilliams says that perspective only views one side of the equation. The reality, according to McWilliams, is Windows 8 will open far more new market opportunities for Intel than it does for ARM.
In the aforementioned State of Tech report, McWilliams covers these and other subjects investors with interests in the mobile computing and data center markets need to understand. Next Inning free trial subscribers will have immediate access to this detailed 15-page report as well as full access to all of McWilliams research and opinions.
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