Intel rides the cloud to higher growth

Intel beat analyst targets in the third quarter, as cloud computing drove demand for Intel-powered storage, though the chipmaker still struggled to gain a foothold in mobile devices.

Paul Otellini has forecast more growth for Intel in the datacentre market, as the company announced third-quarter results. Photo credit: Stephen Shankland/CNET News

In its fiscal third quarter, the chipmaker had revenue of $14.2bn (£8.9bn), up 28 percent year-on-year and nine percent quarter-on-quarter, it reported on Tuesday. Analysts had forecast $14.23bn, according to Reuters. Operating income was $4.8bn, up 16 percent year-on-year and 22 percent quarter-on-quarter.

Intel's main processor group — the PC Client Group — contributed $4bn of profit before tax, while the server-focused Datacentre Group turned in $1.2bn. The Other Intel Architecture Group — a grab bag of Intel's low-energy efforts across Atom chips, embedded processors, and smartphones and devices — made no profit, running at a loss of $140m.

In an earnings conference call, Intel's chief executive Paul Otellini said he anticipated more growth for Intel in the datacentre as the next generation of server-focused chips, the Xeon E5, codenamed 'Romley', is shipping to server manufacturers at the moment and is due to go on sale early in 2012.

He noted that Intel customers with large datacentres "buy in a lumpy pattern". However, he said he expects Intel's latest server and storage products will see strong sales in that area, as "that growth rate... is basically tracking the cloud growth rate, [which] is really quite strong."

"People are adding storage capacity as fast as they're having cloud-computing capacity, because they go hand and glove," he added.

The global PC landscape is being reshaped. Emerging markets now represent two of the top three consumption PC markets in the world.

– Paul Otellini, Intel

Revenue by region remained broadly the same as in previous quarters, with Asia Pacific contributing 57 percent, the Americas 21 percent, Europe 13 percent and Japan nine percent. In the PC sector, however, Otellini noted a shift in sales.

"The global PC landscape is being reshaped," he said. "Emerging markets now represent two of the top three consumption PC markets in the world. China is now the number one PC consumption market in the world, while Brazil has become number three."

Sales trends in the quarter shaped up as the Santa Clara, California-based company expected, he added.

"While consumer demand in mature markets like Western Europe and North America remained soft, enterprise PC demand remained strong and consumer demand in emerging markets continued to rise year-over-year. China was up 12 percent, India 21 percent, Turkey 14 percent and Indonesia 23 percent," he added.

Low-powered mobile devices

Though Intel's netbook and smartphone focused division recorded a substantial loss, Otellini was bullish on Intel's prospects in devices with a small form factor. He cited the chipmaker's partnership with Google on smartphones, announced at the Intel Developer Forum in September, which should see its Medfield Atom chip go into smartphones in the first half of 2012.

ARM is the main competitor every chipmaker faces when trying to get processors into portable devices. However, Otellini believes ARM is likely to become less competitive over time, as chips are made to finer and finer levels of detail.

"As the need for computing performance goes up, both the Intel architecture and the ARM architectures face the same fundamental physics problems, which is: more performance requires more transistors," he said. "So at the end of the day, to deliver multi-core performance, better graphics performance in a battery-constrained environment is going to be a function of the transistors more than the microarchitecture."

Intel develops its own transistor process technology, such as the low-power 22nm tri-gate design set to debut in Ivy Bridge next year. Because of this, Intel is confident that it can take the lead in transistors.

No mention was made on the call of Intel's upcoming many-integrated core architecture, Knights Corner, which is due to launch toward the end of 2012 and is key to Intel's ambition to build an exascale supercomputer.

In addition, Windows 8 and Intel's Ultrabook push should combine to benefit the company, Otellini said, while playing down the idea of ARM becoming a rival on PCs.

"Historically, a new release of Windows has benefited Intel nicely. While there is certainly some possibility of ARM incursion into PC space, I think it's going to be minimal," he said. "To date, our presence in tablets has not been that large. With Windows 8, you have a monolithic operating system across PCs and tablets that Intel can participate in and bring in the advantage of legacy support for applications and device drivers. And in that dynamic, I think we have, net, more upside than downside."