Intel Corporation (NASDAQ:INTC) is releasing new products for its line of top-end server chips in an effort to steal market share from International Business Machines Corp. (NYSE:IBM) and Oracle Corporation (NYSE:ORCL), whose chips are often used for the most complex computing tasks, reports Don Clark for The Wall Street Journal. While Intel has a huge lead in personal computers and servers that handle routine tasks, it has had a hard time transitioning to new sectors including mobile and servers that are handling real-time analytics.
New Xeon chip targets ‘Internet of Things’
The new Xeon chips are supposed to have twice the performance of their predecessors and can exchange data at four times the rate. Since Xeons are significantly cheaper than comparable server chips from International Business Machines Corp. (NYSE:IBM) or Oracle Corporation (NYSE:ORCL), this lowers the bar for new tech companies to implement ‘Internet of Things’ applications. Even if such real-time applications aren’t computationally intensive in the normal sense (compared to high definition graphics rendering, for instance) in order to be useful the new wave of smart devices need to be extremely responsive.
The new Xeon chip line “further democratizes mission-critical computing,” said Intel’s Data Center senior VP Diane Bryant. She says that the new server chips are faster than IBM’s current top of the line, the Power7, although the advantage should be short-lived as IBM is expected to release the specs for its Power8 in April. IBM has traditionally had an edge over Intel Corporation (NASDAQ:INTC) for the most powerful server chips, so it would be surprising if it lost that lead once the Power8 comes out.
Intel needs a hit to meet 2014 guidance
Even if Intel Corporation (NASDAQ:INTC) doesn’t have the fastest chip on the market, as long as it is fast enough for cost-conscious entrepreneurs in the burgeoning Internet of Things market, it could become help the company reach its fairly ambitious 2014 EPS targets.
“We see risks to 2014 guidance as revenue targets would require stabilization in PCs and acceleration in Data Center growth that we do not believe will take place,” wrote Goldman Sachs analysts James Covello, Jack Sheng, and Chelsea Jurman who maintain a Sell rating for Intel. “Additionally, we believe Intel’s GM guidance implies a rise from 59% to low 60s throughout the year despite excess capacity, continuing core PC weakness and ‘contra revenue’ from tablet sales.”
Clearly, Intel Corporation (NASDAQ:INTC) is going after data center growth with the upgraded Xeon chips, but it made a similar push with the Itanium chip line, and didn’t get much traction outside its partnership with Hewlett-Packard Company (NYSE:HPQ). If the migration to mobile continues, which seems inevitable, a middling success with Xeon may not be good enough.