Servers and Data Centers, Intel's formula for Profit Margins

Barron's has a post on Intel' presentation at a Morgan Stanley Technology event.

  • FEBRUARY 28, 2011, 2:42 PM ET

Intel Talks Up Data Center, Networking Prospects

By Tiernan Ray

Most interesting presentation today by Intel’s (INTC) chief of its data center unit,Kirk Skaugen, speaking at the Morgan Stanley Tech, Media and Telecomconference.

One of the more interesting facts was Intel's server processor margins.

Since 2005, Intel’s increased its share of the server market for processors from 80% to 92%, he notes and increased its average selling prices by 60%. Intel’s total unit volume of server chips is about the same as in 2005 as a percentage of total company shipment volume, at 5.5%, but those chips now make up 22% of revenue, double what they were five years ago, and a third of Intel’s profit.

One other part the author discussed as interesting is Intel's comment on Networking.

But another interesting one was Skaugen’s insistence the networking market is going the way of PC microprocessors:

So if you look at an old Cisco [Systems (CSCO) switch or router, it used to be internally developed ASIC from Cisco. If you open up a Nexus 5000 today it’s a Xeon microprocessor next to an ASIC. And I bet you in the future you’re going to just see two Xeon microprocessors there because we’ll put new instructions into the chip that will accelerate things that used to be proprietary.