Intel To Take New Competation

Intel Getting Ready For A Whole New Competition

 

Intel said yesterday that it wants to take on new competition, and evolve to serve new types of customers with electronic devices that are, for the most part, not 'Intel Inside'. During a conference call late yesterday with Wall Street analysts to go over Intel's fourth quarter financials, Intel CEO Paul Otellini defended the company's strategy.

Otellini also added that Intel will get some traction in 2013 and 2014 with Atom-based smartphones. Because of its impressive chip manufacturing process and expertise as a chip designer, Intel will be able to keep current competitors at bay and protect itself from the attacks of new ones.

Lucky for Intel and its virtual monopolies on the desktop, in the laptop and in the data center, it can still deliver $1 billion a month in net profits, even when things are not going 100 percent, as they most certainly were not last year.

Intel's Data Center and Connected Systems Group, which sells processors and chipsets for servers, switches and storage arrays actually saved the company's bottom line in the fourth quarter and for the full year, and did its part to shore up the top line as well.

Otellini added that 22 nanometer chips would start ramping up in the Xeon and Atom server products in the second half of this year, so if you were expecting to see the Ivy Bridge family of Xeon E5 v2 chips before then, you are bound to be very disappointed.

Intel is perfecting its 22 nanometer processes with Ivy Bridge desktop and laptop parts and needs to get that fully ramped up to the "Haswell" family of chips before PCs hit the ground running sometime in the first half of 2013.

To put it simply, Intel can coast a little in Xeon servers so long as it is addressing concerns about ARM servers but it has to preserve whatever excitement it can create in a PC market that might rebound a bit in 2013 when the world's economies pick up somewhat.

Otellini added that the Haswell processors would result in the single biggest generation-to-generation change in improved battery life for an Intel processor, something that is enabled through a very sophisticated power management system. If the Haswell chip is so good, it will call into question why there is a high-end Atom S Series server chip.

In the fourth quarter, the Data Center Group had sales of $2.83 billion, up 4 percent from 2012's numbers and up 7 percent sequentially. The Sandy Bridge ramp up was rolling along, Otellini noted.

The overall volume of chips and chipsets was fairly flat sequentially and actually down from a year ago, but average selling prices for server, storage, and switch chips were up 5 percent from a year ago, as the mix shifted towards higher priced SKUs and, interestingly enough, a pretty good uptake of MP products, which is Intel shorthand for servers with more than two processors.

The Data Center Group posted $1.33 billion in operating income, which was down 8.5 percent. For the year, the Data Center Group had $10.7 billion in revenues, up 6 percent, and posted $5.07 billion in operating income, down a half point.

For the full year, chip volumes were off 1 percent but ASPs were up 4 percent. In his CFO commentary, Smith said that a richer mix of chip sales in the data center as well as "significant growth" in cloud server sales was partially offset by weakness in the enterprise server market.

Looking ahead, Smith said that Intel would return to double digit growth in 2013, helped no doubt in part by the Ivy Bridge CPU coming in the second half of 2013.

Intel is looking for low single digit growth for the year in the PC Client Group, which makes chips and chipsets for anything that is not in the data center or in an embedded device. This would be driven by the Haswell ramp for PCs during the first half of the year and extending out from there.

Smith added that Intel was qualifying Haswell for sale during the current quarter (meaning Q1 2013) and that it had already done some writeoffs in November 2012 relating to early production runs on Haswell.

In the fourth quarter, the PC Client Group booked $8.51 billion in sales, down 6 percent, and its operating income was $2.82 billion, down a much steeper 19.6 percent. Intel said that OEM customers who build PCs were reducing chip inventories, and Intel took some actions in the fourth quarter to rebalance its manufacturing capacity to ramp up 14 nanometer processes, which will be used for the "Broadwell" family of PC chips in 2014.

But no matter how you look at this, PC chip volumes were down 6.2 percent and ASPs were flat in Q4 2012. For the full year, the PC Client Group saw volumes drop one point and ASPs fell 2 points, so it's no surprise that revenues were down 3 points to $34.3 billion.

Interestingly, notebook PC chip ASPs were off 6 percent, while desktop PC chip ASPs were up 4 percent year on year. Operating income for the PC Client Group fell 11.8 per cent to $13.1 billion.

In other IT news

Fusion-io is trying the concept of all-flash servers for HPC and other large scale data center applications that need one-hundred or more storage servers, and has now made available its 1,000+ server hyperscale flash technology.

The ioScale PCIe cards scale from 410 GB, doubling through 825 GB, 1.65 TB on to 3.2 TB and use Fusion's workstation ioFX card technology in a much simplified manner.

But you'll need to buy at least one-hundred units at a time. The largest 3.2 TB drives will cost you $3.89 per gigabyte, with discounts on volume pricing, but once the 2nm NAND versions are out, that price could drop by at least fifty percent or more.

The new cards have a single controller and use commercial grade 2nm two-bit multi-level cell (MLC) flash, not enterprise grade (eMLC).

The card controller includes FlashBack protection and self-healing functions to better deal with issues and avoid a problem.

What stands out with the new cards is that the random write performance is better than the random read performance, a reversal of the usual pattern.

Fusion-io CEO David Flynn continued on the hyperscale idea, saying that OEM partners like Cisco, Dell, HP, NetApp and tier 2 OEMs like SuperMicro have been selling Fusion-io flash cards into the enterprise market.

"We have seen these these OEM products bleed over into the workstation market and introduced the ioFX," said a SuperMicro representative.

Fusion-io has been working the hyperscale customer segment with operators of large data centres. For such large-scale operations, with thousands of standardized servers, the service unit is the server itself-- if it fails it's just switched off. If a rack of them fail, the rack gets switched off.