Microsoft and Intel both released their financial results this week, highlighting the progress they are making in shifting their emphasis to cloud computing. Wintel computers (Windows computers running on Intel chips) were dominant in the era of personal computing, which is coming to an end slowly with more people using smartphones for their computing needs. So now both tech firms are placing bets on the cloud to grow their businesses.
Investors not very clear on Intel’s cloud plans
Microsoft’s cloud business is a combination of services and software that cater to corporations moving their computing functions to remote data centers. Azure is Microsoft’s flagship cloud services business, and its revenue more than doubled in the last quarter, the company said in its Thursday earnings report. Microsoft’s intelligent cloud division saw revenue growth of just 3%. A decline of 14% was seen in the division’s operating profits, including non-cloud products such as traditional server software.
For Intel, the path to growth is not that clear, forcing investors to remain skeptical.
Intel’s shares price have declined by about 1% over the last year, while Microsoft’s shares are up by about 30%. Microsoft’s market capitalization is around $440 billion — almost three times that of Intel at $151 billion. Five years ago, it was double. A fund manager at Synovus Trust, Dan Morgan, holds both companies in his portfolio.
Morgan told Reuters, “There’s this perception that Microsoft is more on the cusp and benefiting from this (cloud) trend. Intel is still more drowned out,” meaning the chip maker not as high-profile in this area.
Intel, Microsoft doing well in their fields
Intel is shifting away from PCs and recently announced it was cutting 12,000 jobs. Revenue from Intel’s data center business rose 9% to $4 billion in the quarter. The segment includes the chips powering cloud data centers, and the chip maker claims it is doing well in this field.
Microsoft’s Azure, a best-known play in the cloud, is a set of services for computing and storage and tools for software developers. Amazon’s AWS unit is the industry heavyweight in cloud computing services, but Azure is gaining ground fast. The cloud computing market is worth $23 billion, of which Azure commands about 10%, while AWS commands 31% share, according to estimates by Synergy Research.
On the other hand, Intel has done well in its segment, dominating the market for processor chips that act as brains of data center computers.