One of the hot "buzzwords" in the server market today is the notion of a dense server, or a "micro-server." The idea behind this type of a server is that you take several very highly integrated, fairly low-power processors and have a bunch of them in a server rack. The upshot is that for some workloads, these types of solutions are more power efficient and -- since energy use is one of the largest costs of a datacenter -- cheaper to own. Some have believed that Intel (NASDAQ:INTC) faces a long-term threat, but the evidence tends to suggest that Intel has effectively countered the threats here.
Intel has been extremely aggressive here
In response to a potential incursion from various chip companies implementing either ARM Holdings (NASDAQ:ARMH)-designed CPU cores or custom cores built on the ARM instruction set, Intel was extremely aggressive in rolling out its first two generations of low-power micro-server parts, known as Centerton and Avoton.
The original Centerton part was, frankly, uncompetitive, offering poor CPU performance, an antiquated front-side bus system interconnect, and very little integration of key IPs such as Ethernet, various network accelerators, and so on. The Avoton part, which was based on the Silvermont processor and came in various flavors with various levels of integration, was extremely competitive across the board, essentially blocking much of the ARM server vendors.
The roadmap today
Intel recently updated its public roadmap to give investors an idea of when the company's next-generation, 14-nanometer micro-server products will launch:
We can see that Intel intends to use the Atom C2000 (Avoton) family for the entirety of 2014 before transitioning to the next-generation Denverton part in what looks like early 2015. Denverton will be built on Intel's 14-nanometer process and is likely to up the cores, the integration, the memory bandwidth, and so on. However, what's more interesting is that the big-brother micro-server part that integrates Intel's "big" core looks set for a late 2014 or early 2015 launch.
Many of the ARM micro-server players, such as Applied Micro (NASDAQ:AMCC), have indicated that they are aiming for Intel "big-core" level of performance with their highly integrated SoCs. Since it is in Intel's best interest to sell higher-performing, higher-priced chips, it comes as no surprise that Intel would prefer to get the big-core based Broadwell SoC out on the leading edge before the weaker Atom-based part (which even in its current iteration is quite competitive).
Intel is defending its server market well, aggressively pursuing the networking space
Intel is the incumbent in the server market and is currently very aggressively attacking the network chip space, a market in which it has just 5% market share (but growing). The company's product stack, from the very highest enterprise servers serviced by the Xeon E7 to these micro-servers serviced by Avoton/Denverton and Broadwell SoC, is quite compelling. It will be extremely difficult for competitors to attack Intel's core server market head on, and Intel's progress in networking is quite encouraging.
Foolish bottom line
As Intel's most profitable business from a raw operating margin percentage standpoint and as the division with the highest operating margin, it is great to see Intel acting aggressively to defend it and grow it. While the ARM vendors may be able to gain share alongside Intel in networking, it's difficult to envisage the ARM folks gaining meaningful share in Intel's core compute markets within the datacenter -- something that should be a relief to Intel stockholders.