Headline Oct 17, 2015/ ''' DATA CENTERS WAR DRUMS '''

''' DATA CENTERS WAR DRUMS '''

THE NEW HOT TREND of  cloud computing   -data centers filled with tightly connected servers   -is remaking the world. So, get ready.

On Tuesday, Intel based in Santa Clara, Calif.,  said that in three months that ended Sept. 26.  PC chips brought in $8.5 billion and chips for servers in computing data centers brought in $4.1 billion. A year ago, PC chips brought in $9.2 billion and data center chips brought in $3.7 billion.

PC sales are in long decline, as customers increasingly use online services connected to mobile devices. While Microsoft and others try to revive the market with new designs and tabletlike models, in the most recent quarter- Worldwide PC shipments fell 10.8 percent from the year before, according to International Data Corporation. 

Making PC chips is still a big business, but not the way it once was. The data center group also has much higher profit margins: Operating profit from PC chips was $2.1 billion, down 20% from a year earlier, while data center chips had an operating profit of $2.1 billion, up 9%.

That matters because Intel is already stressing products in Networking and advanced cloud systems to feed the profitability of cloud systems as PCs continue to wane. That means cloud computing leaders like Amazon and Google could benefit even more, and expand their online operations.

Having missed much of the market for chips in mobile devices, Intel is also investing in sensors for devices connected to cloud systems.

''If you zoom out, we're not a PC company anymore,'' Stacy J Smith, Intel's chief financial officer, said in an interview. ''We still work with PC companies, but we're deeply involved in automotive wearables, all kinds of new devices.''

Last month, Intel was even a sponsor of  Fashion Week in New York, stressing the convergence of clothing and computing.

''The Intel story has become a tale of two-divisions,'' said Bill Kreher, an analyst with Edward Jones: ''Data Centers show an incredible headway. There will come a time soon when it will outweigh PC chips.''

That doesn't mean doom for Intel as the unexpected profitability suggests. All those connected devices increasingly talk companies that use cloud computing technology and Intel makes most of the chips that go into servers in the data centers of cloud systems.

Intel's mix of cloud-computing customers shows how much influence is wielded by just a few big operations. Of  200 cloud company  customers that Intel tracks, just seven take one-third of those chips:  Google, Amazon, Web Services, Microsoft and Facebook, as well as Baidu, Alibaba and Tencent of China.

Last Monday, Dell, a big maker of servers and PCs announced it was buying the data storage giant EMC. On Nov 2, the server and storage business of HP will split off from its PC business, in what top executives hope is a move for a faster-moving business.

Intel may also face new competitors in the cloud business. Last week Qualcomm, a major producer of chips for smartphones, announced a big move into chips that work well in cloud systems.

Diane Bryant, the head of Intel's data center group, in a recent interview, sums up best:  About  30%   of server business is now to cloud companies, and growing at a fast clip. It's the new opportunity for our revenue system.''

Yes!  And  that would also mean, great revenue streams for just about every technology company in the world.  

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