The ongoing war between Intel (NASDAQ:INTC) and leading semiconductor IP supplier, ARM Holdings (LSE:ARM.L), seems to have intensified with the former marking its entry in mobile computing while the latter’s architecture is expected to threaten the foothold of established players in PC microprocessor as well as the server market. ARM is the dominant player in mobile computing, whereas Intel is the undisputed leader in PC microprocessors and servers.
As the two companies continue to encroach on each other’s territory, the latest news doing the round is the presence of Intel’s Atom chips in first Hewlett-Packard (NYSE:HPQ) “Project Moonshot” servers that were initially set to be launched using the low-power ARM architecture. However, as ARM still remains a part of the project’s road map, it continues to pose a threat to established players in the server market such as Intel and AMD (NYSE:AMD).
Though, we believe that Intel will retain its dominance, we estimate its server market share to register an y-o-y decline throughout our forecast period.
HP Opts For Intel Rather Than ARM-Based Processors For Initial Servers Of Project Moonshot
Late in 2011, HP introduced its low-power, large scale data center initiative named “Project Moonshot”, which is aimed to substantially reduce the energy consumption and cost of a data center by making use of hyperscale low-power servers. At the launch, HP announced the use of low-power ARM-based processors for the initial set of servers. At the same time, it also declared that it inteded to partner with market leader Intel to make use of the latter’s processors to support its server architecture at a later point.
However, this seems to have changed as last month HP announced the use of Intel’s new “Centerton” Atom chips for the first production servers instead of the ARM-based processors. HP claims that ARM-based server design continues to be part of the project’s future road map and both Intel and ARM processors as well as others will be part of Moonshot.
Intel’s Server Market Share To Register An Y-o-Y Decline
The fact that HP chose Intel x86 architecture for its first “Project Moonshot” servers is encouraging for the company. However, we need to keep in mind that ARM processors still remain a part of HP’s project and we will see upcoming Moonshot servers powered by the ARM architecture. Additionally, earlier this year, Dell also began delivering ARM-based servers to its customers. Thus, ARM continues to remain a potential threat for Intel in the server market.
AMD, which so far has been the only significant rival of the company in the server market, looks determined to regain its lost market share from Intel. With the recent acquisition of SeaMicro and a collaboration with HP for networking solution & server technologies, AMD boasts of an enhanced portfolio and we believe that the company is better positioned to register an increase in market share.
Thus, we estimate Intel’s share in the server market to drop down below 80% by the end our review period.
Our price estimate of $30.62 for Intel stands at a premium of above 10% to the current market price.