Analyst MKM ups rating to Buy for Intel based on Data Center Surge

Data Centers are part of regular news.  Today ran across this on Barron's blog on Intel being up a Buy from Hold by MKM.

MKM Partners‘s Ian Ing today raises his rating on Intel (INTC) stock to Buy from Neutral, and raises his price target to $45 from $40, as part of a broad overview of end-market conditions for semiconductors in 2015, with one of the main themes being the explosion in data traffic that requires more server processing.

“We likely kept our neutral rating (with positive bias) for too long,” writes Ing, “as PCs stabilized, data center improved, and INTC demonstrated a flexible approach to succeed in tablets and access existing China consumer channels.”

In this same post Microsoft says there are 12 million physical servires running Windows Server 2003.  On July 14, 2015 Microsoft will end support for Windows Server 2003.  Kind of funny to think WinSvr2003 was the last OS I worked on at Microsoft and it is being retired.  Windows XP was last desktop OS I worked on.

Part of the growth potential is also China and Mobile where I now spend way more of my time than working on OS issues.  So it is nice to see that others think there is growth in these areas. The key is to be agile.

INTC demonstrated a flexible approach to succeed in tablets and access existing China consumer channels.”

Intel Data Center up 11%, PC down 1%, so glad I stopped working on the PC

Windows XP in 2001 was the last time I worked on PC operating systems.  I started working on the PC in 1987 on the Mac products at Apple.  After 14 years I was tired of PC operating systems.  In 2002 I switched over the Server operating systems, then management tools before exiting Microsoft.  Now I focus more on Mobile and Cloud.

Intel announced its numbers and Data Center Group is up 11% and the PC group is down 1%

  • PC Client Group revenue of $7.9 billion, down 1 percent year-over-year
  • Data Center Group revenue of $3.1 billion, up 11 percent year-over-year

Intel Ships Brawny Processors to scale up

Intel has released the Xeon Processor E7-8800/4800/28000 v2 family.


What comes to mind is Urs Hoelzle’s call to action that not all services can be provided by whimpy energy efficient low clock rate cores.  There is a need for brawny cores.

Brawny cores still beat wimpy cores, most of the time

Urs Hölzle


Slower but energy efficient “wimpy” cores only win for general workloads if

their single-core speed is reasonably close to that of mid-range “brawny”


At Google, we’ve been long-term proponents of multicore architectures and throughput-oriented

computing. In warehouse-scale systems1 throughput is more important than single-threaded peak

performance, because no single processor can handle the full workload. In addition, maximizing singlethreaded

performance costs power through larger die areas (for example, for larger reorder buffers or

branch predictors) and higher clock frequencies. Multicore architectures are great for warehouse-scale

systems because they provide ample parallelism in the request stream as well as data parallelism for search

or analysis over petabyte data sets.

The Register has a detailed article.

Better late than never: Monster 15-core Xeon chips let loose by Intel

New mission-critical CPUs are mission-critical to Chipzilla's critical money-making mission

Is data center growth slowing? Intel says its enterprise server chips slowed

It can be hard to figure out the growth of the data center industry.  One data point is Intel’s sales of its data center server chips.

ZDNet’s Larry Dignan digs into this aspect.

intel q4 overview


Regarding the data center, Smith said on a conference call:

If you look at the trends in the fourth quarter, I think the trends actually reinforce the growth rate among cloud, high performance computing, networking, storage. They all came in consistent with what we thought. As we entered Q4, we saw that we had more inventory out in the world than we knew when we started the quarter so that had to be burned off. And then secondly, we saw a tapering off in order patterns across certain customers. We think that was driven by the government shutdown and the uncertainty around the debt ceiling. Because when you look at the customers and the segments it's pretty clearly in those segments. We had a range around growth rates for 2014 and the investor meeting we said 10 to 15%. Based on a slower growth in enterprise in Q4 and maybe a slower recovery in enterprise over the course of 2014, I'd say we're now at the lower end of that range. So we're more at the 10% range than the 15% part.

Calxeda's Tough Battle was not ARM, but Intel's investment in a Fabric to reinvent servers

There is sadness in Calxeda’s lack of funding to continue its efforts on ARM servers.

Calxeda Closes Its Office: The Sad Story Of One Of The Most Innovative Companies In Years

But, over a year ago, I started to doubt whether Calxeda would survive.  I would chat with some server hardware folks and one of the ideas we would discuss is out of the 8+ companies out there with ARM chips there would eventually be only three who survive, and whether Calxeda would be one of them was not clear.  We had more faith in Samsung to be a player than many of the others.

Almost everyone focuses on ARM as if the ARM chip has magical powers that can beat the x86 chip once someone ships an ARM chip for servers.  ARM is just a chip.  x86 is a chip.  I decided to look for a recent paper that compares ARM vs. x86 and found this paper.

A Detailed Analysis of Contemporary ARM and x86 Architectures
Emily Blem, Jaikrishnan Menon, and Karthikeyan Sankaralingam
University of Wisconsin - Madison

The results show. (note: ISA is Instruction Set Architecture)

We find that ARM and x86 processors are simply engineering
design points optimized for different levels of performance, and
there is nothing fundamentally more energy efficient in one ISA
class or the other. The ISA being RISC or CISC seems irrelevant

So if ARM vs. x86 is irrelevant what was the battle to fight?  It is about creating a new Fabric for Servers.  Read the press statement from Calxeda.  Their first two paragraphs say Fabric.

Over the last few years, Calxeda has been a driving force in the industry for low power server processors and fabric-based computing.

The concept of a fabric of ARM-based servers challenging the industry giants was not on anyone¹s radar screen when we started this journey.

In April 2012 Intel announced it had licensed Cray’s supercomputing fabric.

Intel Acquires Industry-Leading, High-Performance Computing Interconnect Technology and Expertise

SANTA CLARA, Calif., April 24, 2012 – Intel Corporation today announced it has entered into a definitive agreement with Cray Inc. to acquire certain assets related to its high-performance computing (HPC) interconnect program. With the agreement, Intel gains access to Cray’s world-class interconnect personnel and intellectual property.


The Cray interconnect team is responsible for the award-winning Gemini interconnect as well as the upcoming Aries interconnect, designed to work in Cray’s next-generation  supercomputer, codenamed “Cascade,” which will integrate Intel® Xeon® processors. The transaction is expected to close before the end of the current quarter, subject to customary closing conditions being met.

Intel announced the C2000 Atom to go against ARM.  In this blog post I referenced posts on Barron’s blog by analyst who discussed the ARM vs. Atom.

There are probably many other small things that made it difficult for Calxeda.  It’s hard to be a disruptive force especially in Intel’s turf.